The news sent Telkom\u2019s share price plummeting, which means its market cap is now lower than Rain\u2019s valuation.<\/p>\n
An MTN insider<\/a><\/strong> has since told MyBroadband that the operator didn’t want exclusivity. They had asked Telkom not to conduct the negotiations concurrently.<\/p>\n When Telkom could not provide an answer for how long it would need to consider Rain’s offer, MTN walked away from the negotiation table.<\/p>\n To understand Viljoen\u2019s view, you have to go back to 15 July when MTN and Telkom announced that they were in the early stage of discussions about MTN acquiring Telkom.<\/p>\n The announcement was welcomed by investors, with Telkom\u2019s share price jumping 30% and MTN\u2019s stock price increasing 5%.<\/p>\n A merger made sense as it would have created a telecoms powerhouse with tremendous scale.<\/p>\n It would have combined MTN\u2019s deep pockets and mobile market strength with Telkom\u2019s extensive fibre, tower, and property assets.<\/p>\n The biggest prize for MTN was Telkom\u2019s extensive fibre assets which are housed under Openserve.<\/p>\n Armed with these assets, it could have rapidly expanded its fixed- and mobile data 5G products. It could have also helped Openserve to significantly expand its fibre-to-the-home coverage.<\/p>\n Combining MTN and Telkom\u2019s fibre and broadband assets would have created a broadband powerhouse in South Africa.<\/p>\n The entity would have been bad news for Rain. It would have faced increased competition from MTN in the 5G market and lost customers to Openserve\u2019s fibre products.<\/p>\n Brandon Leigh, Rain CEO<\/p><\/div>\n In August, Rain stunned the market when it requested to present the Telkom board with a proposal to merge the two companies.<\/p>\n Rain CEO Brandon Leigh said a merger would create a 5G powerhouse and a strong third player to compete with the Vodacom and MTN \u201ctelco duopoly\u201d.<\/p>\n South Africa\u2019s Takeover Regulation Panel (TRP) was quick to instruct Rain to withdraw a press statement regarding a proposed merger with Telkom.<\/p>\n It said Rain issued the announcement without the prior approval as required in terms of Regulation 117 of the Companies Regulations.<\/p>\n Rain duly complied, but it has achieved its goal. The media was awash with news about Rain\u2019s plan and the impact on the MTN and Telkom discussions.<\/p>\n Many commentators laughed off the proposal as it would not come close to the value the MTN deal could bring Telkom shareholders.<\/p>\n However, Rain had carefully managed the media release and was aware of what was likely to follow.<\/p>\n The operator is backed by some of South Africa\u2019s top business leaders, including Paul Harris, Patrice Motsepe, Michael Jordaan, and Willem Roos.<\/p>\n They are all experienced deal-makers and know the industry well. They could predict how Rain\u2019s announcement would play out and what they must do to achieve their goal.<\/p>\n In September, Rain made an official proposal to Telkom, suggesting the acquisition of Rain by Telkom for newly issued shares.<\/p>\n The Telkom Board said it was evaluating Rain\u2019s proposal.<\/p>\n Paul Harris, Rain’s chair and largest shareholder<\/p><\/div>\n The fact that Telkom was considering Rain\u2019s proposal did not sit well with MTN, and three weeks later, it terminated discussions with Telkom.<\/p>\n The first part of Rain\u2019s plan worked. A deal between MTN and Telkom was off the table, which prevented a huge broadband competitor from being created.<\/p>\n \u201cRain played its hand beautifully to ensure that a formidable competitor was stillborn,\u201d Viljoen said.<\/p>\n \u201cThey were willing to look foolish in the short term to chalk up a significant long-term win.\u201d<\/p>\n It raises the question of whether Rain is still keen for Telkom to buy it and create a 5G powerhouse.<\/p>\n With a valuation of R18 billion, slightly higher than Telkom\u2019s market cap of R17.5 billion, such a deal would be wonderful for Rain shareholders.<\/p>\n It would allow them to either cash out on a great valuation or hold a significant share in a much bigger telecoms company.<\/p>\n Even if a deal is struck at a lower valuation, or not at all \u2014 which is the likely scenario \u2014 Rain benefitted from its Telkom proposal.<\/p>\n Harris, Jordaan, and Roos showed why they are South African business royalty. They outmanoeuvred two of their largest competitors and ensured Rain\u2019s prospects remained positive.<\/p>\n A version of this article was first published by Daily Investor<\/a><\/strong> and is republished with permission.<\/em><\/p>\n If telecommunications were a game of poker, then Rain has bluffed itself to winning a crucial hand with a mediocre set of cards.<\/p>\n","protected":false},"author":2,"featured_media":430158,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[62528,14,28470,3],"tags":[44951,35,6204,40184,33753,75532,43716,80587,109,46832],"class_list":["post-465655","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-5g","category-cellular","category-fibre","category-telecoms","tag-african-rainbow-capital-arc","tag-headline","tag-michael-jordaan","tag-patrice-motsepe","tag-paul-harris","tag-piet-viljoen","tag-rain","tag-takeover-regulation-panel-trp","tag-telkom","tag-willem-roos"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/465655"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=465655"}],"version-history":[{"count":2,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/465655\/revisions"}],"predecessor-version":[{"id":465687,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/465655\/revisions\/465687"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/430158"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=465655"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=465655"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=465655"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Rain approaches Telkom<\/strong><\/h2>\n
![\"\"](\"https:\/\/mybroadband.co.za\/news\/wp-content\/uploads\/2022\/07\/Brandon-Leigh-rain-CEO.jpg\")
<\/a>Rain wins<\/strong><\/h2>\n
![\"\"](\"https:\/\/mybroadband.co.za\/news\/wp-content\/uploads\/2022\/08\/Paul-Harris.jpg\")
<\/a>
\nNow read:\u00a0MTN obliterates Vodacom in 5G speeds and coverage<\/a><\/h2>\n","protected":false},"excerpt":{"rendered":"