Korean suitors demand ‘strategic role’

SOUTH Korea’s KT Corporation, which wants to buy 20% of Telkom , said yesterday that its policy was to play a strategic role in the companies it bought into rather than remain a passive investor.

"We invest in companies where we can leverage our expertise, where we can invest in technology and provide innovative products, and provide efficiency and also help with procurement given our good relationship with many global vendors." Mr Kim has been tasked with transforming KT from a network provider into a consumer-orientated business. He said fixed-line operators around the world were under pressure to survive and remain relevant.

KT provides fixed and mobile broadband, pay-TV via its satellite and internet TV products. It is also diversifying in other areas such as software applications, car rental, real estate and media content, including music. "The traditional business is sinking. We are losing $50m a month from fixed voice. If you don’t take drastic decisions you will die," Mr Kim said.

The company has 19,3-million fixed-line subscribers, 7,6-million broadband customers , 16,3-million mobile users and 2,6-million internet protocol TV clients.

Mr Kim said KT is looking for acquisitions, joint ventures or strategic partnerships in Africa, South America and the US.

KT looks for equity investments or joint ventures where it can influence the strategic direction of the company and be involved in the operations. The company already has a presence in countries such as Rwanda and Algeria where it provides consulting services in areas such as network infrastructure.

News of KT’s talks with Telkom has received mixed reactions but supporters of the deal said KT will assist Telkom in rolling out high-speed broadband to many people around the country and also provide fibre to the home.

Mr Kim said fibre to the home could work in urban areas but in rural areas fibre to the curb would be a better option. With fibre to the curb, fibre is terminated in a cabinet on the street, several metres away from the customer’s premises.

He highlighted e-health, e-government and e-education as some areas KT wants to focus on.

The Public Investment Corporation, which owns 11,1% in Telkom, yesterday told Bloomberg it supports the KT and Telkom deal, saying that a tie-up could have positive benefits for Telkom.

Khulekani Dlamini, a head of research at Afena Capital, said yesterday he was "lukewarm" about the potential acquisition as it would, among other things, dilute shareholdings and the culture of the two teams may clash should KT want significant operational involvement.

"Telkom is undergeared and does not necessarily need the capital injection. It is also unclear as to what the business will do with the cash.

"One can’t trust Telkom with capital. In the past four years or so it has written off almost its entire market capitalisation. Multi-Links alone was a net loss of over R10bn," he said.

The Communication Workers Union yesterday said that it would oppose the deal.