Everyone wants a piece of Telkom
MTN and Telkom have issued cautionary announcements on the Johannesburg Stock Exchange news service confirming that discussions between the two companies are still underway.
This comes after Telkom received several unsolicited offers in recent weeks, including a share buy-out, acquisition, and merger proposition.
Last month, the two companies said they were discussing MTN acquiring Telkom’s entire issued share capital.
No details were disclosed, but MTN said it could offer shares or a combination of shares and cash to buy Telkom.
On Monday, 22 August, Telkom and MTN refreshed their cautionary announcement from 15 July.
“Shareholders are advised that discussions are still in progress which, if successfully concluded, may have a material effect on the price of the company’s securities,” they said.
“Accordingly, shareholders are advised to continue to exercise caution when dealing in the company’s securities until a further announcement is made.”
The further cautionary announcement comes after African Rainbow Capital-owned Rain announced on 11 August that it had submitted a merger proposal to Telkom’s board.
Within hours of Rain’s press release, the Takeover Regulation Panel ordered the cellular network operator to withdraw its announcement, saying it was unlawful.
The following day, investment firm Toto Consortium offered to buy government’s 40.5% stake in Telkom.
According to Bloomberg’s calculations, Toto Consortium offered around R7 billion. This was based on a 30-day average share price of the firm, plus a 20% black empowerment discount contained in the offer letter, it reported.
On 16 August, Rain retracted its press release. The operator said it was pleased with Telkom’s announcement that its board would consider an offer or formal proposal from Rain.
These three suitors have presented Telkom with three very different proposals.
Toto Consortium’s offer is about buying out a major shareholder — the South African government.
However, communications minister Khumbudzo Ntshavheni, whose department is the custodian for the shares, said the stake is not currently for sale.
Industry experts state that MTN is after Telkom’s fibre assets to compete with a potential deal between Vodacom and Vumatel-owner CIVH.
Based on previous Competition Commission rulings, a deal between Telkom and MTN that includes the former’s mobile network would not be approved.
Vumatel is currently South Africa’s biggest residential fibre access provider, having passed and connected more homes to its network.
Telkom’s Openserve division is catching up and remains South Africa’s undisputed fibre king regarding raw network size, with over 169,000km of cable in the ground.
CIVH has around 43,800km of fibre, including the networks of Vumatel and Dark Fibre Africa.
While MTN’s offer is about fibre, Rain’s is about cellular networking.
Rain says a merger with Telkom would create a 5G powerhouse and strong third mobile network player to take on Vodacom and MTN.
“We believe the business case for a merger is very compelling for both companies and believe it is achievable,” Rain stated.
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