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Korea: Issuer talking long-distance

The Korean government is eager to sell off a large chunk of Korea Telecom, not least because it needs the money to help balance its budget. But with an issue of up to $2 billion likely, there's no way the local market can cope, especially when it's beset by scandal. So is it time for the finance ministry to call up some international investment bankers to discuss a foreign listing? Tony Shale reports.

Asia's biggest international equity deal of the year will come from its most closed and parochial market. State-owned telecommunications company Korea Telecom, which has annual revenue of w5.71 trillion ($7.2 billion) and assets of W11.6 trillion, wants to raise up to $2 billion. With the Korean stock market suffering from political instability and restrictive practices, the government may have no choice but to make its first-ever foray into international capital markets when undertaking a privatization.

Speculation about the deal has thrown an unaccustomed spotlight on a market often overlooked in favour of more racy Asian bourses. "This could easily be the single-biggest transaction of the year," says Andrew Harrington, regional telecommunications analyst at Salomon Brothers in Hong Kong. "With [the stock market's] free float of shares estimated to be worth around $20 billion, it would account for around 10% of total market capitalization," says Namuh Rhee, a director of Dongbang Peregrine Securities in Seoul. "And this would make it the second-largest company on the Korea Stock Exchange (KSE)." Adds Adrian Cowell, chief representative of Kleinwort Benson in Seoul: "It is undoubtedly the deal everyone is awaiting."

The government is keen to accelerate what has been a much-delayed privatization programme.

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