By Loni Prinsloo
(Bloomberg) – MTN Group Ltd.’s talks to buy South Africa’s Telkom SA SOC Ltd. have stalled following a rival proposal from another telecom company, according to people familiar with the matter.
Negotiations about price and other terms have been halted for the time being, though MTN hasn’t decided to walk away from the deal, the people said, asking not to be identified because the discussions are confidential.
Telkom shares plunged as much as 16% following the Bloomberg News report, the most since April 2020, and traded 10% lower as of 11:12 a.m. in Johannesburg. That values the company at about 22 billion rand ($1.2 billion). MTN was little changed, having pared earlier gains.
MTN, Africa’s largest wireless operator, stepped back after Telkom received an approach from Rain Group Holdings Pty Ltd., creating uncertainty about its proposal, the people said. Rain said it had offered to sell itself to Telkom, which is partially owned by the South African government, in exchange for shares.
Talks could restart if Telkom clarifies its position on the Rain offer, the people said.
“MTN could be better off quitting merger talks with Telkom and focusing on growth investment,” Bloomberg Intelligence analyst John Davies said in a note to clients.
A representative for MTN declined to comment. A spokesperson for Telkom referred to the company’s statement on Oct. 4, which said that MTN’s proposal was still under consideration by both parties and that shareholders should exercise caution. The spokesperson declined to comment further.
MTN and Telkom’s potential combination would create South Africa’s largest mobile operator by subscribers, overtaking rival Vodacom Group Ltd. The move would likely raise antitrust concerns, given the number of major mobile networks in the country would be reduced to three from four, with the vast majority of subscribers controlled by the top two carriers.
“The regulatory complications of an MTN-Telkom tie-up increase risk and uncertainty, potentially outweighing the synergies of a merger,” Davies said.
(Updates with share prices in third paragraph.)
Read also:
- FirstRand redux: Rain wants a merger with Telkom, aims to spoil MTN’s planned party
- How BEE can hurt local businesses – Telkom CEO Sipho Maseko
- MTN in discussions to bring Telkom on board – again
