MTN and Telkom have begun discussions about the possibility of MTN purchasing Telkom. In return, MTN is offering shares or a mixture of cash and shares in MTN. The two companies have already notified shareholders that discussions have started. However, this doesn’t mean the purchase will take place.
“Discussions are at an early stage and there is no certainty that the transaction will be consummated,” MTN and Telkom said.
“If concluded, the transaction may have a material effect on the price of the company’s securities. Accordingly, shareholders are advised to exercise caution when dealing in the company’s securities until a further announcement is made.”
Déjà vu (all over again)
Previously, the two companies came close to agreeing on a slightly different deal. Back then, MTN wasn’t interested in purchasing Telkom as a whole, but rather just in Telkom’s radio access network. The deal eventually fell through due, however. This is because the Competition Commission blocked the deal, due to a worry of diminishing competition in the market.
More specifically, the Competition Commission had worries about MTN creating a duopoly with Vodacom in South Africa.
“Such a resultant duopoly market structure is unlikely to serve customers well, particularly when considering that it is the smaller mobile operators that lower prices before the larger operators, MTN and Vodacom. The merger is also likely to have a significant impact on the structure of the South African mobile markets and future competitive dynamics,” said the regulator at the time.
After this, the deal was forgotten. A spark was rekindled near the end of 2021, with MTN approaching Telkom yet again. At the time, Telkom wasn’t interested. Oh, how times change.
The same problem
At the time, then Telkom CEO Sipho Maseko said that he wasn’t interested in pursuing a deal. He went on to say that if MTN pursued such a deal in the future, it would be possible if the proposition was imaginative enough. So as to not upset regulators, you understand.
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Telecoms mergers in South Africa would need to be structured in such a way so as not to worry the Competition Commission once again. MTN and Telkom know this, which means that current dealings have possibly already been approved by the Competition Commission. Otherwise, it’s possible that the deal will be blocked again, leaving the two operators at square one.
Source: MyBroadband
