KT suffers S. African setback
By Kim Yoo-chul
Korean telecommunications giant KT is bailing from an initial plan to acquire a significant stake in South Africa’s biggest fixed-line telephony company, sources said Sunday.
KT had earlier announced intentions to buy 20 percent of Telkom, but now numerous sources at the company admit that the plans are being reconsidered.
The South African government has been cold on the potential KT-Telkom deal as the companies continued to argue over the share acquisition price. Telkom’s unionized workers have been opposing the deal as well.
Should the deal fall through, it will serve as another hit to investors’ confidence in KT as it continues to struggle to cope with slowing business momentum in the saturated Korean telecommunications market, and find sustainable success overseas.
KT had planned to send 100 workers to Telkom, which was one of the conditions set by the South African carrier, to share its experience and know-how in mobile telephony and the Internet.
KT has been desperately searching for growth opportunities in developing regions such as Africa and South America, but doesn’t have much to show for its efforts.
When reached by The Korea Times, high-ranked KT executives were notably defensive.
``There has been some misunderstanding about our initial intention to buy a 20 percent stake in Telcom. We are interested in a lot of things at once, and that was only one of many options we were considering,’’ said Kim Beom-joon, the chief financial officer.
``Telkom earlier agreed to lower the price of KT’s proposed 20 percent stake. That caused the government to get angry, however, that's silly because the South African government proposed the deal, initially,’’ said one KT source.
Also, Telkom was to have issued new shares to KT, diluting the South African government’s stake to less than 50 percent.
However, the deal compromised by the ongoing investigation by South Africa’s Competition Commission against Telkom over anti-trust activities which were favorable to KT. Telkom may have to pay an antitrust fine of as much as $417 million for abuse of market dominance and anti-competitive practices by charging excessive prices for services to other industry participants.