MTN’s Telkom buyout could be bad news for data prices — Analyst

Consumers should not expect price cuts on mobile data or voice calls should MTN’s proposed acquisition of Telkom go ahead.

That is according to World Wide Worx’s Arthur Goldstruck, who spoke to Sunday newspaper Rapport.

MTN and Telkom first announced they were discussing a possible takeover deal in July 2022.

That came after Bloomberg reported in November 2021 that MTN had approached Telkom with a proposal for a buyout, but the company showed no interest at the time.

MTN has said it could offer shares or a combination of shares and cash to buy Telkom.

Goldstuck stated that effectively taking Telkom out of the equation could significantly impact mobile package prices.

While it does not have the network coverage or quality of its competitors, Telkom differentiates itself by generally offering the cheapest mobile packages on the market.

Meanwhile, Vodacom and MTN tried to keep prices “as high as possible”, Goldstuck said.

He said MTN’s buyout of Telkom would effectively see the bigger operator “gobble up” Telkom’s lower prices, unless MTN made a big strategy turn-about and decided to match Telkom’s pricing.

Without Telkom, Cell C would be the only small player with a nationwide network left to contend with the heavyweights of Vodacom and MTN.

But Cell C has chosen to rely entirely on Vodacom and MTN for its network coverage to save on capital expenditure, making it challenging to undercut its competitors on price significantly.

Regulatory experts believe it would be tough to convince the Competition Commission that a deal including Telkom’s mobile network should go ahead.

Goldstuck said unless the government believed that selling its 40.5% Telkom stake to fund the fiscus was more important than healthy competition, it was also unlikely to come to the party.

However, MTN is not the only company vying for a piece of Telkom.

Rain also announced a proposed merger with the operator on 11 August 2022, which it was forced to withdraw following a reprimand from the Takeover Regulation Panel (TRP).

The TRP said Rain’s announcement was unlawful because it did not get prior approval from the panel.

One of the company’s biggest shareholders — African Rainbow Capital — recently said that Rain’s board was still debating an official offer and planned to present it to Telkom by the end of the month.

Rain appears to be primarily interested in Telkom’s mobile business, with its now-withdrawn statement saying a merge with Telkom could create a new “5G powerhouse” and strong third mobile network to rival Vodacom and MTN.

“We believe the business case for a merger is very compelling for both companies and believe it is achievable,” Rain stated.

The company also recently said it planned to roll out its own 5G mobile network.

While it currently offers mobile 4G connectivity, its 5G products are fixed wireless access and are limited to larger mains-powered Wi-Fi routers.

Industry experts believe that Telkom’s fibre business is MTN’s key target in the proposed acquisition.

Securing Telkom’s Openserve fibre infrastructure could put the company in a better position to compete with Vodacom.

Vodacom hopes to close a deal with Vumatel and DFA owner CIVH to merge their fibre assets. Despite the extent of Openserve’s fibre network, Vumatel’s home fibre services currently pass and connect more homes.

Investment firm Toto Consortium has also offered to buy the government’s share in Telkom for around R7 billion.

However, the Department of Communications and Digital Technologies, the custodian of the government’s share in Telkom, has said it is not up for sale.

Now read: Vodacom and MTN’s massive fibre deals compared

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MTN’s Telkom buyout could be bad news for data prices — Analyst