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KT Corp plans to buy 20% stake in South Africa's Telkom for $600m

17 октября 2011

South Korea's KT Corp. said it is in talks with Telkom SA Ltd. to buy a 20% stake in the struggling South African fixed-line operator for about $600 million, as the South Korean company turns its attention away from the saturated domestic scene and focuses on markets with growth potential.

Telkom will issue new ordinary shares for cash at a price of 36.06 rand ($4.58) each if the deal goes ahead.

Both companies declined to reveal further details, but people familiar with the matter said KT Corp. was the one to approach Telkom about the purchase.

KT Corp., South Korea's No. 1 fixed-line and No. 2 mobile operator by revenue, is seeking to expand in markets where it sees growth potential, given the saturated state of the South Korean market. In South Africa, fixed-line users account for 8.2% of the population, compared with 76% for mobile users, according to data from World Wide Worx.

Telkom is currently battling strong competition, with several mobile operators having entered the fixed-line market, and the growing popularity of mobile phones has made the environment tough. Pricing pressures and regulatory interventions have also taken their toll. At the end of September, Telkom said it expected basic earnings in the first half to be at least 40% lower than a year earlier, as a result of losses in its mobile business. A number of management changes in recent years have not helped matters.

"The operating environment remains challenging as a result of low economic growth and the uncertainty created by the global economic crises and volatile markets that have characterized 2011 to date," Telkom said at the end of September.

One analyst said a stake acquisition by KT Corp. could give Telkom the means to roll out more fiber lines and provide a more stable management environment.

"It's appropriate for KT to expand its business overseas as it gets harder to make a profit in the domestic market since Korean telecom companies are facing pressure from the government to lower their mobile rates. They need to find new growth engines in markets outside of Korea," said Yang Jong-in, an analyst at Korea Investment & Securities.

The Korean company in August reported a marginal increase in second-quarter net profit and signaled continued pressure on earnings in the coming months.

KT posted a 0.3% increase in net profit of 420.6 billion won ($364 million) for the second quarter, compared with KRW419.5 billion a year earlier.


Источник: Total Telecom

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