MTN boss says acquisition of Telkom still makes sense

MTN Group CEO Ralph Mupita said the strategic rationale for consolidation between MTN and Telkom remains, but would not comment on starting discussions with Telkom again.

Last year, MTN entered into discussions to buy Telkom in return for shares or a combination of cash and shares.

The announcement was well-received by investors, with Telkom’s share price jumping 30% and MTN’s stock price increasing 5% on the news.

However, Rain entered the fray with its own proposal. It wanted Telkom to buy Rain for newly issued shares in Telkom.

It muddied the waters as Telkom couldn’t assure MTN that talks were exclusive, which resulted in MTN walking away from the deal.

In January, Telkom announced that it had terminated discussions relating to Rain’s proposal about a potential acquisition.

“After initial discussions, but prior to any due diligence, the parties have decided that a suitable transaction is not possible at this time,” Telkom said.

It opened the door for MTN to engage in discussions with Telkom again, but it is not clear whether MTN is keen.

Commenting on the issue, Mupita said the strategic rationale for consolidation remains. “Nothing of a strategic nature changes in three to six months,” he said.

He said having four mobile players in a market is unsustainable. “You don’t see the third and fourth players having the capacity to invest in their networks,” Mupita said.

“Twenty years ago, it was very different. Voice-centric networks did not require as much capital, which means you could have four to six players.”

“Right now, with data networks, it is quite challenging for a number three. It is the case in Nigeria and Ghana.”

The MTN CEO said the wave of consolidation sweeping across other markets is also relevant in South Africa.

However, he would not comment on whether they will start discussions with Telkom soon. “We pulled out of discussions with Telkom, and there is no further update on that,” Mupita said.

This article was first published by Daily Investor and is republished with permission.

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MTN boss says acquisition of Telkom still makes sense