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    Home»News»Telkom tanks as talks end

    Telkom tanks as talks end

    News By Duncan McLeod13 July 2012
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    Telkom’s share price touched fresh record lows on Friday after it told shareholders that its talks with Korea’s KT Corp were officially over.

    The counter closed down by 1,7%, reaching an all-time record low of R18,01/share at Friday’s close. In intraday trade, shortly after Telkom announced that shareholders no longer needed to exercise caution in its shares because of the KT talks, it had fallen as far as R17,16/share.

    Telkom listed on the JSE in March 2003 at an issue price of R28/share.

    Its share price has been under significant pressure in recent weeks after cabinet effectively blocked its plans to sell 20% of its equity to KT Corp.

    Telkom management expressed disappointment in the decision and investors took fright that the decision would undermine Telkom’s potential for growth.

    The talks had been going on for at least nine months and had been expected to result in the transfer of skills and knowledge from the Korea, which is one of the world’s most connected nations.

    The latest share price fall means Telkom is now valued, in terms of its market capitalisation, at less than R9,4bn. By comparison, mobile rival Vodacom, in which it once held a 50% stake, is valued at R138bn.

    Its share price is trading at a paltry 5,5 times trailing earnings, compared to 13,1 and 13,5 for Vodacom and MTN respectively, suggesting investors are not at all optimistic about Telkom’s growth potential.

    Cabinet has told communications minister Dina Pule to report back to it about options for Telkom. One of these appears to be the renationalisation of the company, which was partially privatised in the 1990s. Government holds a direct 39,8% stake in Telkom and because the KT deal required the support of 75% of shareholders, its decision not to support the deal meant it couldn’t proceed.

    But if government decides to renationalise the company, it would fly in the face of best practice the world over, where governments have moved to liberalise their telecoms industries by reducing and then completely selling their stakes in their incumbent fixed-line operators.

    Critics have said government doesn’t know whether to treat Telkom as a private company or a resource to be used for its state-led national development plans.  — (c) 2012 NewsCentral Media

    Dina Pule KT Corp Telkom
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