Korea Telecom shortlists six

Three European and three US houses have made it through to the second round for the company''s forthcoming ADR.
Presentations for a roughly $2.3 billion deal will take place on Monday. The company has said that it will appoint one European house and one US house from a shortlist comprising: Credit Suisse First Boston (classifying itself this time as a European house), Goldman Sachs, ING Barings, Morgan Stanley, Salomon Smith Barney and UBS Warburg.

A decision is expected fairly quickly despite recent comments from the Deputy Finance Minister that the government needs to maintain a flexible privatization timetable. MOFE official Kim Jin Pyo was reported on domestic television arguing that the government needs to be careful with its timing because it is trying to sell a large number of shares in a number of state-owned companies.

Korea Telecom is currently scheduled to come to market before the end of June and bankers believe that investors are preparing to weight up in the stock once more. Year to date, the company has underperformed the Kospi, falling 18.06% to Wednesday's close, compared to a 0.577% rise in the overall index.

"The company is highly correlated to the domestic market, but has underperformed it because it's been hit by a double whammy," one banker reports. "In addition to suffering from domestic weakness, it’s also come down because of negative sentiment towards the global telecoms sector."

Yet the same banker also states that the ADR should be well received because it has fallen to such cheap levels. "A lot of accounts seem to be coming round to the view that this is a stock they should be looking to start loading up with," he comments. "It is, after all, the world's largest broadband operator and its mobile operations continue to perform extremely well."

The government is hoping to sell a 16% stake in ADR form. Were a new issue to be launched flat to the company's existing ADR price, KT would raise about $2.3 billion based on Wednesday's trading price of $23.02. This represents a roughly 10% premium to an underlying close of Won54,900. One ADR equals half a share.
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