Cabinet’s KT call ‘tragic’ – Telkom chair
Lazarus Zim has used the operator’s annual general meeting, his last as chairman, to criticise government over its decision to block the sale of 20% of the company’s equity to Korea’s KT Corp. By Duncan McLeod.
Outgoing Telkom chairman Lazarus Zim on Wednesday indirectly hit out at government over its decision to block the sale of 20% of the fixed-line telecommunications operator’s equity to Korea’s KT Corp, calling the move “tragic” and a “big loss”.
Speaking at Telkom’s annual general meeting in front of communications minister Dina Pule and communications department director-general Rosey Sekese, Zim, who stepped down as a director and chairman at the meeting, said the deal with KT would have benefited the company in a number of important ways.
Pule said in July that cabinet had decided to block the proposed deal, despite Telkom and KT Corp investing more than nine months in a due diligence process.
Zim said the proposed deal with KT was brought to Telkom by former communications minister Roy Padayachie but added that the company did not pursue the deal because the minister had encouraged it. “A great deal of work was done to see if this was a fit,” he said. “KT was one of two [potential partners] that fitted the bill and would have given us broadband expertise and experience in the successful transition to a next-generation network.”
He said KT was prepared to put “skin in the game” by paying R3bn for its investment and that Telkom would have benefitted from the Koreans’ investment in research and development. It would also have enhanced Telkom’s credit rating and its borrowing capacity — important factors as it gears up to spend more than R20bn over the next three years refreshing its network.
“The board had seen, with borrowing required, that Telkom needed to be in a place where it had an improved credit rating,” Zim said. “But we failed to convince the department of communications to support the transaction. It was tragic for Telkom. I take responsibility for it. It was a big loss for the company [and] the share price has reacted very badly.”
He added that the problems that the KT deal would have helped solve still persist. “In fact, they are accelerating.”
Zim said Telkom has made “representations” to government about what it believes the state should do to secure the company’s future. Cabinet, government’s highest decision-making body, is considering a number of proposals for Telkom put forward by an inter-ministerial committee. It’s not known when a decision will be reached.
“This is a very important process,” Zim said. “We have made representations through management in workshops. It’s not proper of me to say here what recommendations we have made. We need to give government space, time and respect to look at all the inputs. We have made inputs on broadband roll-out. We have made inputs around the issue of a strategic equity partnership.” — (c) 2012 NewsCentral Media