MTN in talks to buy South Africa’s service provider, Telkom

Originally published on Financial Times

Africa’s biggest phone carrier MTN is in talks to buy South Africa’s Telkom, in a deal that would enshrine a mobile duopoly as the continent’s most industrialised economy tries to accelerate the rollout of 5G connections.

The companies said on Friday that they were in discussions over a deal for MTN to buy all of Telkom either with shares or a combination of cash and stock.

“Discussions are at an early stage and there is no certainty that the transaction will be consummated,” the companies added, without disclosing a potential price.

Shares in Telkom, which is 40 per cent owned by the South African government, surged more than 26 per cent after the talks were announced.

The move by MTN, the second-biggest telecoms group in South Africa, to buy out the third-largest, with a combined market share of about 45 per cent, comes amid an investment boom in the country’s mobile economy where 2G and 3G connections are still common.

It could also raise the hackles of South Africa’s competition commission, which blocked a 2015 network sharing deal between MTN and Telkom over what it said would be a “resultant duopoly market structure,” and which has more recently attacked high data prices in the industry.

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After a long restructuring to pay down debt and resolve problems in Nigeria, its biggest market, MTN is vying with South Africa’s market leader, Vodacom, to dominate an expansion in data networks that has been unleashed by recent reforms.

In March, South Africa completed an auction of spectrum for 4G and 5G services, one of few structural reforms achieved by President Cyril Ramaphosa after years of delay under his governing African National Congress. South African operators had not received substantial new allocations of spectrum for more than a decade.

MTN, which is aiming to provide 5G coverage to a quarter of the population by the end of this year, led the R14.5bn ($844mn) bids for spectrum alongside Vodacom. Telkom was the third-biggest bidder.

MTN and Vodacom have dominated investment in better quality networks while Telkom and other smaller players have tried to compete on prices in what is still an expensive market for mobile data by regional standards, despite a 2020 order by the competition commission to cut tariffs.

At the start of this year, South Africa was the 14th most expensive African country to buy 1 gigabyte of mobile data, dearer than Somalia or Senegal, according to a price index compiled by Research ICT Africa.

MTN raised cash this year by selling thousands of South African mobile towers to IHS, a leading independent operator, and it is considering listing or selling its mobile-money unit, which analysts estimate has become the biggest in Africa.

Source: Financial Times

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