Unwrapping Telkom’s new partner

If Korea Telecom (KT) buys a stake in Telkom worth approximately R47bn analysts believe it could be positive for investors and consumers.

MD of World Wide Worx, Arthur Goldstuck believes that should the deal go ahead, consumers will win. “The number of fixed line connections and their quality will increase,” said Goldstuck.

David Lerche, telecommunications equity analyst at Avior Research agrees with Goldstuck but was quick to say the deal has not yet been confirmed. In fact trade unions have cited their concern over the deal and potential job losses.

Lerche says “KT will be able to assist Telkom in driving down the cost of running their network whilst making it profitable to roll out more services to more people.” Adding that this deal would also see KT assisting Telkom in spearheading the roll out of its next generation network (NGN) – that will see it having the ability to offer services, such as video on demand (VOD) and IPTV (internet TV) to clients.

Imara S.P. Reid’s Sibonginkosi Nyanga says the deal may help “Telkom fight increasing competition that has eaten into its profits. Much depends however on the extent, to which Telkom can successfully apply KT’s inputs. At present it seems rather like a beached whale in which case KT might need a very big tractor, not just words of advice (20% is very far from control), to get it going again. Nevertheless, it could lead to something.”

But who is KT?

According to an investors’ note from Imara S.P. Reid, “KT is the former (South Korean) state-run monopoly and, it is the country’s largest provider of fixed and mobile telephone services, and high-speed broadband fibre-to-the-home services, with many of these offering speeds of 1Gbit/s. It also offers internet protocol television (IPTV) and satellite services.”

“It controls about 90% of the fixed line telephone service market in Korea and is the largest provider of broadband internet service, with more than 40% of the market. KT’s mobile phone unit ranks behind only SK Telecom in the mobile telecom segment. The company also provides business customers with information technology servicesm such as consulting and systems integration, and its KTH subsidiary operates a web portal and develops online content.”

KT also operates on four basic philosophies – innovative management, future orientated management, communication based management and offering customers “exciting products”. Something, Goldstuck says Telkom needs:  “Telkom has been in a cultural jam and has experienced and inability to shift its philosophy to that of offering services”.

Goldstuck believes that KT’s key focus on its customers has been a contributing factor to its success, hence the philosophies listed above.

“KT started with a vision from the Korean government and not just in words… the country also paid serious recognition for its need to up its act and to use its human and technical resources to take the nation into the future,” said Goldstuck.

Source: Moneyweb

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Unwrapping Telkom’s new partner