MTN’s Takeover Plans for Telkom Would Need the Government’s Support First

6 months ago 3306
Sourced from Business Tech

South Africa’s MTN Group, the largest telecom in Africa and 2nd largest in its home nation has reportedly made a pitch to buy SA’s third largest telecom, Telkom. According to an anonymous insider who spoke to Bloomberg, Telkom has shown no interest in being taken over by the MTN Group.

It currently seems unclear if MTN will continue persuing the purchase of the semi-private telecom. “There is no deal on the table in relation to this matter,” MTN said in a statement after inquiries. Telkom itself has yet to comment on the reported offer.

Telkom currently has a market valuation $1.94-billion, which pales in comparison to MTN’s valuation of $21-billion. A valuation that has steadily surged following a multi-year asset-disposal programme and a recent spike in the price of its shares of more than 177%.

On the surface it may be seem that the two companies are likeminded on certain things. Just last week, Telkom and MTN agreed on an rare multi-year roaming partnership, where Telkom will begin using MTN’s network.

Both companies are also aligned in seperating their tower businesses from their main units with MTN currently busy with a sale-and-leaseback deal of its South African towers, and Telkom distancing itself from its tower business in preparation for a possible listing of the unit.

The over 40% state-owned Telkom, while a much smaller operator than MTN, controls SA’s largest landline network and sells mobile-phone packages, amongst a bevvy or other products and services. Its acquisition by MTN would position the Big Yellow Brand in a better spot to close the gap between it and its local rival, the top telecom in South Africa, Vodacom Group.

However, the deal would be tricky as Telkom’s semi-state owned nature would mean that support from the government of South Africa would be needed and a number of competition issues would have to be worked out before any money could actually change hands.

Though after Telkom’s lack of comments on the matter, and the fact Telkom was positioned as uninterested by the insider, it seems this deal is unlikely, at least for the time being.


By Luis Monzon
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