Telkom shares shot up more than 13% on Thursday on speculation MTN could take another swing at acquiring its smaller rival
Once again, MTN is thought to be after Telkom for its fibre network, SA’s largest.
Bloomberg reported SA’s second-largest mobile provider was trying to revive takeover talks after failing to make such a deal happen in 2022, citing sources familiar with the talks.
Local telecom operators have long argued there is a need for consolidation in the market.
The biggest deal on the table now is Vodacom’s bid to take a 30% stake in Remgro’s telecom unit Community Investment Ventures Holdings (CIVH), operating as Maziv, together worth an estimated R13bn with the option of 40%.
After almost four years, that deal has finally received approval from competition authorities, opening the way for other potential transactions in the space.
As with the R10bn spent annually by Vodacom and MTN in recent years to cover 99% of the country with their mobile networks, a similar effort is needed in fibre and other infrastructure, which will come at a huge cost. As such, operators are finding ways to pool their resources and share the risk.
Given its size and rival status with Vodacom, MTN is the most likely candidate to open its cheque book.
For now, MTN clearly sees building out its own fibre network as unviable in SA, despite its ambitions to be a big player in the market. The group has stated this position repeatedly, leaving only an acquisitive strategy on the table.
MTN, which made an estimated R30bn bid to buy 100% of Telkom in July 2022, withdrew its offer after rival operator Rain made its own approach to merge with the fixed-line operator. It has been widely accepted that MTN was mainly interested in the deal over Telkom’s large fibre trove, housed in Openserve.
Telkom has a market capitalisation of about R28.4bn.
When approached by Business Day, the group said it “cannot comment on speculation”.
Flagship Asset Management’s Philip Short agrees that the approval of the Vodacom/Remgro fibre merger will yield more deal activity. “From the moment the Competition Commission approved the Vodacom/Maziv deal, there was always going to be a high probability that MTN would relook at Telkom and Openserve.”
He said the outcome around Vodacom-Maziv raises the chances that an MTN-Telkom tie-up will also get the green light.
“Vodacom has a significant advantage over MTN in SA with the Maziv fibre infrastructure they now have. MTN needs its own big fibre infrastructure partner to catch up to Vodacom now, and the only player bigger or comparable to Maziv is Openserve.”
He highlighted opportunities in the space, including that backhaul, the connection between mobile tower sites and the core network, was increasingly connected using fibre.
Telkom’s share price ended the day up 13.04% at R55.56, bringing gains for the year to about 59%.
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