South African fixed-line operator Telkom and Korea-based KT Corporation have entered into a memorandum of understanding relating to a potential strategic venture.
In October, Telkom said it was in talks with KT Corporation, which may see the JSE-listed company sell a 20% stake to the Korean company.
In its results presentation for the six months to September, Telkom said the deal would benefit it by enabling broadband penetration growth, reducing operational and capital expenditure and enabling skills transfer.
Telkom said the potential agreement would create a building block for KT to expand into Africa and diversify its business.
However, in a statement issued yesterday, Telkom says its corporate strategy will not change if the deal goes ahead.
Telkom explains the memorandum the companies have entered into provides for “an exclusive period of engagement and information exchange to enable the companies to confirm the areas of mutual strategic and business co-operation and envisaged benefits of the potential strategic venture”.
The exclusive period - which Telkom refers to as a diagnostic period - will start immediately, and Telkom will update shareholders in six weeks when the cautionary announcement is renewed, it says.
Telkom says, if the diagnostic review is completed successfully, the venture will only be proposed to shareholders if several conditions are met.
These include the conclusion of a deal to the satisfaction of both parties, endorsement by Telkom's major shareholders, and prior consultation with the financial surveillance department of the South African Reserve Bank.
If the deal is implemented, there will be no change to Telkom's corporate strategy and there will not be a loss of employment, Telkom says.
The operator adds there “is still no certainty that a formal transaction will be proposed or concluded”, and told shareholders to continue being cautious when trading shares.
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