Telkom, KT agree on terms

JSE-listed Telkom and Korea-based KT Corporation have, in principle, agreed on a per-share price for KT's purchase of a 20% stake in the fixed-line operator.

In October, Telkom said it was in talks with KT, which may see the JSE-listed company sell a 20% stake to the Korean company.

Telkom this morning issued a statement to shareholders about its potential strategic venture that could see KT buy 20% of Telkom, and the two companies enter a five-year co-source management services agreement to” formalise the relationship and identified areas of mutual strategic and business cooperation”.

After an “extensive investigation period” into the merits of the proposed venture, the companies have, in principle, reached an agreement regarding the terms of the potential venture which includes a revised cash issue price for the new Telkom ordinary shares to be issued to KT.

Telkom and KT have agreed to a cash issue price for the new Telkom ordinary shares of R25.60, which is a 9.9% premium to the closing price on 4 May.

The deal is subject to several conditions, including wrapping up the transaction agreements and the final resolution of the current investigation by the competition authorities into the competition complaints against Telkom to KT's satisfaction.

Telkom is facing two charges by the Competition Commission, which could see it fined as much as R7 billion if it loses both matters.

Telkom says the deal will also need in-principle support from the South African government, which holds a 39% stake, as well as support from Allan Gray and the Public Investment Corporation.

The operator says discussions are ongoing and shareholders should still be cautious when trading shares.