MTN and Telkom have informed shareholders that the two companies are discussing a merger, and not for the first time. MTN intends to acquire the entire issued share capital of Telkom in return for shares or a combination of cash and shares in MTN.
The two companies have emphasised that the merger discussions are still at an early stage and there is no guarantee that the transaction will take place or what the details would entail, as reported by MyBroadband.
“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.”
After a courtship between MTN and Telkom that first started in March 2014, the latest talks of a merger seem to be ones out of necessity.
Dominic Cull, a telecom lawyer and owner of Ellipsis Regulatory Solutions, suggests that the current discussions between MTN and Telkom are in response to a merger between competitors Vodacom and Community Investment Ventures Holdings (CIVH).
As reported by Business Insider, “a deal mooted in November 2021 by rivals Vodacom and the Remgro-controlled CIVH, merging their fibre network operations, had the potential to reshape the market, leaving MTN and Telkom facing a rival that now had considerable fibre assets”.
For Vodacom, the merger with DFA’s 13,200 km fibre network, along with Vumatel’s fibre network 31,000 km, with its own fibre assets, will give it a significant footing in the rapidly growing fibre market.
For MTN, the merger with Telkom would also see its transition into a powerful fibre operator that would enable it to successfully compete with Vodacom. But first they will need to get past the Competition Commission, who previously accused both MTN and Vodacom of having significant market power and using it to drive up data costs.
Vodacom and CIVH got around the concerns that it would gain more power in the market, as the fibre assets of both companies would be housed in a separate business and not see a change to CIVH’s open-access business model, as explained by Cull.
However, details about the MTN and Telkom deal are still unclear and we can’t be sure if their deal will be designed similarly to the one between Vodacom and CIVH, or how they’re going to respond to the Commission’s concerns this time around.