Fin24

KT Corp trims Telkom stake offer

2012-05-08 13:49

Johannesburg - KT Corp has cut its offer for a 20% post-issue stake in operator Telkom [JSE:TKG] by nearly a third, bringing the total sale value down to about R3.3bn.

South Korea's No 2 mobile operator had initially intended to pay R36.06 per ordinary share, but has reduced the offer by 29% to R25.60, representing a 10% premium to Friday's closing price, Telkom said.

The fixed-line company that is majority owned by the government has been struggling to keep up with bigger mobile operators MTN Group [JSE:MTN] and Vodacom Group [JSE:VOD].

Shares of Telkom, which has forecast that its earnings for the year ended March fell by at least 25%, are down nearly 20% this year.

"I think the deal itself is slightly positive for Telkom as it gives them a capital injection and they would gain from KT's knowledge base," said David Lerche, a telecoms analyst at Avior Research.

He said the deal includes an issue of 130 million new shares for KT, which would dilute the government's shareholding to 32% from the current 42%.

KT has been scouring for opportunities in Africa, Latin America and Eastern Europe seeking to grow earnings as competition back home heats up.

Battered in recent years by steadily falling fixed-line revenue and expensive blunders in Nigeria, Telkom has been looking to offset shrinking demand for its core business by pushing into new businesses and markets.

The company has also been beset by other problems at home, with the competition regulator asking in February that it be fined R3.5bn for an excessive pricing complaint logged back in 2004.

A court ordered a stop to its network overhaul in April, in a petition by an infrastructure provider disqualified from a bidding process related to the project.

Analysts say the government could place some hurdles to the effectiveness of the partnership with KT, like any attempts to reduce a bloated payroll.

Telkom shares are up 0.6% at R23.55, compared with a 0.5% decline by the All Share [JSE:J203] index.