MTN Group CEO Ralph Mupita has shut down speculation that the mobile provider is in talks to acquire smaller rival Telkom.
Last week, Bloomberg reported that SA’s second-largest mobile provider was trying to revive takeover talks after failing to make such a deal happen in 2022.
During a media event on Friday, Mupita rejected the claim, saying no such talks were taking place. “There are no talks with Telkom. There are no advisers that have been engaged. We did discuss this sometime in the past [but] there are no active discussions,” he said.
That said, it makes sense why speculation has been rife, because industry players understand that MTN has only two options available to compete effectively in home and fixed internet provisioning: partnership and acquisition.
Mupita reiterated that MTN sees the third option — building its own fibre network — as unviable in SA, despite its ambitions to be a big player in the market. “Building is completely off the table. SA has built enough fibre and it would be a poor allocation of capital for us to build fibre on our own,” he said.
MTN, which made an estimated R30bn bid to buy Telkom in July 2022, withdrew its offer after rival 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 for Telkom’s large fibre trove housed in Openserve.
SA does need market consolidation, both for infrastructure and telecom operators. For the quantum of investment to build these networks, the profit pools are small.
Mupita did not rule out the possibility of another approach down the line. “We cannot rule out anything in the future. Right now there are no talks. Our options are partnering or acquiring.”
Local telecom operators have long argued there is a need for consolidation in the market.
The biggest deal on the table is Vodacom’s bid to take a 30% stake in Remgro’s telecom unit, Community Investment Ventures Holdings (CIVH), operating as Maziv, 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.
“SA does need market consolidation, both for infrastructure and telecom operators,” said Mupita. “For the quantum of investment to build these networks, the profit pools are small, therefore we’ve always been of the view — especially over the last four to five years — that market consolidation is needed and inevitable in SA over the medium to long term.”
For now MTN has been using fixed wireless access (FWA) in the home or business, which employs routers and a SIM card, to take up market share in the fixed internet market, where fibre operators currently dominate.
“Attacking the home can be done through FWA or FTTH [fibre-to-the-home]. FWA needs extensive spectrum assets, particularly around the 3,500Mhz band. If we have 100MHz like we do in Nigeria, we can really go for FWA for home connectivity without affecting the mobile experience on 5G,” Mupita said.
MTN currently has less than 100MHz of these specific radio waves, placing a limit on this option.
After gaining 13% on Thursday following the speculation, Telkom shares closed down 8% at R51.10 on Friday. However, they are up 52% year to date, valuing the group at R26.12bn.
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