Telkom South Africa Ltd. (TKG) slid to the lowest in more than eight years after saying the government won’t support a plan to sell a stake in the continent’s biggest fixed-line phone company to South Korea’s KT Corp. (030200)
Shares in the Pretoria-based company dropped for a third day, falling 8.3 percent to 21 rand at the 5 p.m. close in Johannesburg, the lowest since October 2003.
Communications Minister Dina Pule told Telkom yesterday the cabinet decided not to back the sale of a 20 percent holding to KT, the company said in a statement today. The government is Telkom’s largest owner with 39.8 percent of the stock, and state-controlled pension fund Public Investment Corp. holds 10.9 percent, according to data compiled by Bloomberg.
KT, South Korea’s biggest phone and Internet provider, offered on May 8 to pay 25.60 rand a share, or about 2.68 billion rand ($310 million), for the stake, 29 percent below an Oct. 14 offer of 36.06 rand a share. Kim Yoon Jeong, a spokesman for the Seongnam-based company, declined to comment.
Telkom will speak with the communications minister to discuss the decision and “seek to obtain clarity on the context of the decision given that KT, and the transaction, were introduced to Telkom by the government,” Pynee Chetty, a Telkom spokesman, said by e-mail. The nation’s government said its decision not to support the transaction took into account the role Africa’s biggest telecommunications company will play in increasing access to services.
“Telkom is a key and strategic asset in the rollout of this telecommunications infrastructure,” the Cabinet said in an e-mailed statement today. The “government recognizes the need for Telkom to implement an urgent turn-around strategy. New options will be considered by both Telkom and government in this regard.” It asked the Communications Minister to report on the possible options within three months.
The government considered the commercial value and the strategic nature of the transaction before deciding to oppose it, Collins Chabane, a minister in the presidency, said at a media briefing earlier in Pretoria today.
“We encourage investments, including those in state companies, when the opportunity presents itself,” Chabane said, declining further comment and referring questions to Telkom.
The company’s shares dropped as much 6.6 percent yesterday and 38.4 million shares changed hands, the highest one-day volume since June 2004. The daily average traded in the past 12 months is 1.6 million shares, according to data compiled by Bloomberg.
The share movements ahead of the government’s announcement today will be reviewed by JSE Ltd. (JSE), Shaun Davies, the bourse’s director of market regulation, said in an e-mailed response to questions.
“The JSE surveillance division is reviewing the trading in Telkom shares ahead of the announcement and if we conclude that the trading requires further investigation, we will refer the matter to the Financial Services Board’s Directorate of Market Abuse,” said Davies.
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