Telkom, KT deal called off

Government maintains stranglehold on telecommunications evolution as it calls a halt to Telkom deal with Korea Telecoms.

Telkom today advised shareholders that the potential strategic venture with Korea Telecom Corporation (KTC) has been called off.

Telkom has been informed by the Minister of Communications that the proposed transaction between the Companies had been presented to cabinet on 30 May 2012 and that cabinet had taken the decision not to support the transaction as proposed.

“Telkom advised shareholders on 1 June 2012 that the Company will be engaging with the Minister of Communications to discuss cabinet’s decision and the implications thereof,”” the R33-billion telecommunications operator said in a statement. “”This engagement will seek to obtain clarity on the context of the decision given that Korea Telecom, and the transaction, were introduced to Telkom by Government.””

KTC was set to take a 20% stake in Telkom, and its involvement was expected to boost the organisation, both in terms of expertise and with regard to greater urgency in the roll-out of high-speed broadband services.

While some analysts had criticised the deal for bringing in a low-cost, low-margin operator that would disadvantage shareholders, this very criticism indicated good news for consumers.

The South African government in effect owns just over half of Telkom, with 39.8% of shares owned directly ands 10,9% through he Public Investment Corporation. While the deal, with an estimated R3,8-billion, would have represent a healthy injection into the treasury, it would have meant a smaller percentage return for the Government annually.

However, the benefits in expertise for Telkom, quicker roll-out of new technology, and potentially lower prices for consumers would have served the national interest far more effecttively than a large slice of a declining pie.

The Cabinet’s decision will thus be seen as a further example of Government intransigence in loosening the policy stranglehold over the development of communications in South Africa.

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