MTN to Buy a Tech Company – Telkom
The smaller local rival Telkom SA SOC Ltd. and MTN Group Ltd. are in talks to merge, which would make the merged business the largest mobile phone operator in South Africa in terms of subscribers. According to Bloomberg, both businesses are negotiating a deal under which MTN will purchase Telkom in its entirety, either through stock or a cash and stock arrangement.
According to Bloomberg, the conversation between the South African businesses is still in its early stages and “there is no certainty the transaction will be finalized.” “Shareholders are informed that MTN and Telkom SA SOC Limited [Telkom] have engaged in discussions with regard to MTN purchasing the entire issued share capital of Telkom in exchange for shares of MTN or a combination of shares and cash in MTN,” read the statement in the MTN press release. Since MTN and Telkom are the second and third-largest operators in South Africa, respectively, any merger of the two would encounter significant regulatory obstacles because the new company would take a clear market lead.
According to Reuters, if the agreement between MTN and Telkom is successful, it will help MTN compete more effectively with the market leader, Vodacom Group. In an agreement worth up to $1 billion, Telkom would grant MTN access to its fiber network, which is essential for the development of 4G and 5G mobile services. If the acquisition is completed, MTN will get access to Telkom’s Openserve fiber business, which connected over 2.5 million locations and generated 13.4 billion rand ($782 million) in revenue for the fiscal year that ended on March 31. Vodacom recently decided to purchase a co-controlling interest in Community Investment Ventures Holdings’ fiber assets, placing MTN under pressure to respond.
MTN declared its intention to leave the Middle East in 2020 and concentrate on the rapidly expanding African market. According to AJ Snyman, a financial analyst at Peregrine Capital, there is “zero” likelihood that the South African Competition Commission will approve the acquisition as it stands. “If the acquisition closes, then MTN and Telkom will be at least above 50% market share in the mobile arena, and that’s definitely, certainly a dominant market position,” Snyman said. MTN to Buy a Tech Company – Telkom.