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(Bloomberg) — MTN Group Ltd. is exploring whether to pursue an acquisition of a majority stake in landline provider Telkom SA SOC Ltd. to challenge Vodacom Group Ltd.’s dominance in South Africa’s telecommunications market, according to people familiar with the matter.
MTN has held exploratory discussions in recent months about a possible offer for Pretoria-based Telkom, said two of the people, asking not to be identified because the deliberations are private. A bid isn’t imminent as a final decision hasn’t been made. With a market value of $3.4 billion and about 40 percent owned by the state, Telkom controls South Africa’s largest landline network and also sells mobile-phone packages.
Johannesburg-based MTN has been seeking a transformational deal as revenue shrinks in its home market, where it trails crosstown rival Vodacom in terms of subscriber numbers. Vodacom, controlled by Vodafone Group Plc, is seeking antitrust approval to acquire broadband company Neotel Pty Ltd. to push its Internet offering to small and medium-sized businesses. MTN is Africa’s biggest wireless company with more than 155 million mobile-phone customers on the continent, and is valued at 377 billion rand ($31.8 billion).
“Telkom is engaging in discussions with a number of industry players to consider how we, as an industry, could operate more efficiently,” spokeswoman Jacqui O’Sullivan said by text message. “As a JSE listed company, we are bound by all relevant JSE disclosure processes and as such, Telkom would follow all necessary processes, if required.”
MTN spokesman Chris Maroleng declined to comment when called by Bloomberg.
After South Africa’s government, Telkom’s biggest investor is state-worker pension fund manager the Public Investment Corp., which holds an 11.4 percent stake, according to data compiled by Bloomberg.
The government may sell non-strategic assets including a 13.9 percent stake in Vodacom as it seeks to raise 20 billion- rand to help state utility Eskom Holdings SOC Ltd. fund construction of new power plants amid frequent power cuts because of inadequate supply, people familiar with the matter said earlier this month.
Telkom, which owns South Africa’s fourth-biggest mobile- phone provider as well as the fixed-line network, halted four years of revenue decline in 2014 and its management is trying to cut spending to increase profit. Telkom and MTN have been negotiating a separate network-sharing agreement for almost a year.
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