Two South African operators – Telkom and MTN – are reportedly in talks about a potential deal for the former’s loss-making mobile unit.
Details about the deal itself remain unclear but any form of alliance between the two companies is likely to…
Two South African operators – Telkom and MTN – are reportedly in talks about a potential deal for the former’s loss-making mobile unit.
Details about the deal itself remain unclear but any form of alliance between the two companies is likely to meet regulatory hurdles, according to local news website TechCentral citing informed sources and an industry expert.
Earlier this week, Telkom CEO Sipho Maseko said the company was considering options for the struggling mobile unit and was in talks with some parties about it.
In a briefing following the release of the company’s first-half results, Maseko attributed most of the unit’s difficulties to the fact that it was “late to the market” but added that Telkom will always need a mobile business.
Telkom, which is the smallest of South Africa’s four mobile operators, was said to have held talks with number three Cell C about consolidation opportunities a few months ago.
Alan Knott-Craig, the CEO of Cell C, said in June that consolidation is “one way to solve a lot of problems” in the South African mobile market.
Although a deal between Telkom and Cell C would be easier from a regulatory perspective, TechCentral wrote that the two players are not currently in formal discussions.
Conversely, a deal between Telkom and MTN, which is the country’s second-largest operator, is expected to attract regulatory attention, an industry expert was quoted as saying.
Meanwhile, number one Vodacom recently entered exclusive discussions with the owners of Neotel to acquire the local fixed-line operator.
The talks between MTN and Telkom are partly coming in response to the Vodacom-Neotel deal, according to the report, as it is expected to reinforce the incumbent’s position in both the mobile and fixed markets.
Telkom, which provides fixed, mobile and internet services, is 39.8%-owned by the South African government, while 10.5% is held by the Public Investment Corporation and 5.4% by local investment firm Allan Gray. Approximately 42.3% of the company is in free float.
For the six months to 30 September, its operating revenue was up 0.3% to R16.2bn (US$1.6bn), while its debt decreased 34.9% to R4.3bn (US$424.6m).
Telkom was not immediately available for comment while MTN declined to comment on the report.
