Shares in Telkom plunged 10.82 percent to R143.98 yesterday after it called off talks to dispose of its stake in Vodacom and sell its fixed-line assets to MTN, thwarting the chances of creating a company that will offer fixed-line and cellular services.<\/p>\n
Telkom said that after detailed investigations into strategic, operational and regulatory aspects, the parties were unable to conclude a transaction “in the best interest of their respective shareholders”.<\/p>\n
The termination of the talks “was driven by primarily matters related to the anticipated costs and benefits of the implementation of the transaction”.<\/p>\n
Khulekani Dlamini, a portfolio manager at Renaissance Specialist Asset Managers, said it was a complex deal from the beginning due to among other issues pricing and regulations.<\/p>\n
The deal was unlikely to have passed regulatory hurdles as the potential merged entity would have had an unfair competitive advantage. MTN is the second-largest cellular operator while Telkom dominates the fixed-line business.<\/p>\n
Irnest Kaplan, a telecoms analyst at Kaplan Equity Analysts, said yesterday that the blocking of Telkom’s bid for technology firm Business Connexion by the competition commission could have been a clear indication that the MTN and Telkom transaction was doomed.<\/p>\n
Bloomberg said Cell C’s chief executive, Jeffrey Hedberg, welcomed the end of the talks because the deal would have “sparked anti-competitive conduct” and had the potential to cause “rapid and permanent damage to competition”.<\/p>\n
The decision to terminate the talks is a blow to Telkom, which needs to diversify its business because its traditional fixed-line business is losing out to cellphones and competition from value added network providers such as Internet Solutions. Telkom’s net profit from fixed-line plunged 46.6 percent to R2.6 billion in the six months to September.<\/p>\n
For MTN the deal, which was backed by the government, could have fast-tracked its entry into the fixed-line market. MTN, whose share price gained 7.65 percent to close at R129.50, is spending R1.3 billion to build a fixed-line network.<\/p>\n
Its back to the drawing board for Telkom, which needs a cellular partner to expand into new business areas. The termination of talks was a blow to Vodafone, which had a grand plan of raising its 50 percent stake in Vodacom and then seek a JSE listing.<\/p>\n
Vodafone said yesterday that it was still interested in raising its Vodacom stake.<\/p>\n
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