Microsoft to Buy Stake in Korea Telecom

Microsoft Corp. will pay $500 million for a 3% stake in Korea Telecom Corp., the nation’s top provider of high-speed Internet connections, the South Korean government said.

The software giant will buy bonds with warrants, paying a 38% premium to the stock’s last traded price, said Hahn Chun Koo, a government official in charge of the nation’s privatization of Korea Telecom.

The purchase is the latest investment by Microsoft in a company whose networks offer high-speed access to the Internet, which the software maker needs to sell Web services and distribute its software. Korea Telecom, the largest provider of broadband services in Korea, had 3.6 million high-speed Internet subscribers at the end of November.

Officials of Redmond, Wash.-based Microsoft weren’t immediately available for comment.

“The government needs to privatize Korea Telecom, and Microsoft wants to take a foothold in Korea,” said Lee Hong Jae of Korea Investment Trust Management Co. in Seoul. “It’s a good deal for both companies.”

Under terms of the agreement disclosed Saturday, Microsoft can’t sell the stake for two years, Hahn said.

Microsoft has a 15.4% stake in Liberty Media Corp.’s Jupiter Telecommunications Co., Japan’s largest cable-TV operator and a provider of broadband service.

Korea Telecom’s American depositary receipts closed at $19.50, down 5 cents Friday on the New York Stock Exchange. Microsoft’s shares rose 78 cents to close at $67.54 on Nasdaq.

The Korean government is trying to reduce its 40.1% holding in Korea Telecom under a pledge to the International Monetary Fund in return for a bailout in 1997 following the collapse of its currency, the won. The government limits foreign ownership in Korea Telecom to 49%.

Earlier, Korea said it would sell as much as 11.8% of the phone company to overseas investors. About 9% of the firm was sold to foreign investors in a bond sale Thursday, leaving 3% up for grabs.