Shares in fixed-line operator Telkom plummeted to an all-time low on Friday after it withdrew a cautionary signalling an official end to talks with South Korea’s KT Corporation.
This follows the decision by Cabinet earlier this month not to support a potential strategic venture that would have seen the Korean group acquire a 20% stake in Telkom‚ the biggest fixed-line telephone operator on the African continent.
“Shareholders are advised caution is no longer required to be exercised by shareholders when trading in the company’s securities‚” “Telkom said in a statement to the JSE.
The withdrawal of the cautionary saw the group’s shares fall by 5.7% to R17.16. At 14:51‚ the stock was down 1.92% or 35 cents at R18.19‚ having recovered somewhat.
Telkom announced on June 1 that the government‚ its biggest shareholder with a 39.8% stake in the operator‚ had decided not to support the proposed sale of a 20% stake to KT Corp.‚ South Korea’s largest phone and Internet company.
The two parties had reached an in-principle agreement regarding the terms of the venture‚ including a revised cash issue price for the new Telkom ordinary shares to be issued to KT.
Apart from KT acquiring a 20% stake in Telkom‚ the two companies would have entered into a five-year co-source management services agreement to formalise the relationship and identify areas of mutual strategic and business co-operation.
“At the moment Telkom needs to come up with a new strategy‚ competition is stiff. The investor expectation was that KT would bring expertise to move Telkom forward - now the company has lost that competitive advantage‚ which affected the shares‚” Leticia Nkumbula‚ telecoms analyst at Africa Analysis‚ said. - I-Net Bridge