Johannesburg - Telkom
[JSE:TKG] is in talks with KT
Corporation that could see the South Korean company take up a 20% stake in the
fixed line operator.
The two firms would issue new Telkom ordinary shares of
R36.06 each should the deal come through, Telkom said in a statement on Friday.
KT Corp, South Korea’s top fixed-line carrier and No.2 mobile operator, said it was seeking to buy a 20% stake in Telkom for $600m.
"We are pursuing an MOU on a stake acquisition and a strategic partnership with Telkom," KT said in a statement.
Telkom has been looking to offset shrinking demand for its
core business by pushing into new businesses, such as mobile phones and new
markets.
But profits have been squeezed by the high start-up costs
from its mobile launch last year, and the cash-burn from selling its Nigerian
unit for $10m, a fraction of what it originally paid.
Telkom expects earnings to fall by at least 40% in the six
months to end-September.
Its shares are down more than 15% so far this year.
Korea Telecom and Telkom have similar histories as the fixed-line incumbents in their countries. But Korea Telecom has successfully transformed itself into a "next-generation operator". It operates in pay TV, fixed-line and mobile, has a market capitalisation estimated at $10bn and 30 000 employees.
At the JSE's opening on Friday morning, Telkom shares climbed R1.60 or 4.98% to R33.70.