MTN’s Potential Telkom Takeover Touts 5G Acceleration In South Africa
It is perhaps no longer news that South Africa’s MTN, which is the governing Group of the largest mobile telecommunications company in Africa, has finally come upfront with its intentions to buy its domestic rival, Telkom, the third-largest player in the country’s telecoms market.
MTN, which is the second-biggest telco in South Africa (after Vodacom), looks to take advantage of Telkom’s market reach and become a leading player in the landscape.
“Discussions are at an early stage and there is no certainty that the transaction will be consummated,” MTN said in a statement on the Johannesburg Stock Exchange, a disclosure which bumped its shares by some 5 percent and those of Telkom by nearly 35 percent.
But, more importantly, MTN’s takeover of Telkom, while bringing the context of South African telecoms closer to a consolidation point, smoothens the path through which the market can accelerate the rollout of fifth-generation internet connectivity. This holds even truer as the country attempts to transition fully away from 2G and 3G, both of which are still commonly used by internet subscribers.
Unarguably, South Africa leads 5G adoption in Africa, playing home to some of the most forward-looking mobile phone carriers on the continent.
Vodacom, which currently dominates the market, is known to have launched the first commercially live 5G network on the continent and has since been expanding the coverage. Although, the race started under the auspices of data-only telco, Rain.
Vodacom, Rain, and, of course, MTN, are the only telcos to have launched operational 5G networks, while others like Cell C and Telkom have been waiting for authorities to release additional spectrum licenses. In March this year, ICASA held an auction, wherein MTN and Vodacom each spent the most purchasing licenses and both emerged as winners of the exercise. Telkom was the third-largest bidder in the auction.
Somewhat obviously, MTN is taking a more aggressive expansion approach by putting Telkom on its acquisition radar.
The deal has been long in the making, delayed mostly by ICASA’s worries over the merger creating a duopoly market structure in South African telecoms. However, its completion will see MTN garner the firepower it needs to expand its data networks beyond the country’s municipalities.
Moreover, MTN, which last year cut ties with the Middle East to focus more on African markets, has ambitions to provide 5G connections to a quarter of the 59 million South African population by the end of 2022. The telco has spent roughly USD 844 M on spectrum allocation, perhaps having sold off thousands of its tower assets to IHS Holdings this year.
The coronavirus pandemic occasioned the demand for more data and the need for faster internet speeds, especially in Africa’s industrialized economy, where strict lockdown protocols not only necessitated social distancing but also brought alive remote work. By transitioning to 5G, South Africa would be meeting the said demand, ultimately opening up its digital economy to more opportunities.
All of the country’s mobile operators are now working on deploying 5G base stations, including Cell C, which has already moved up to 50 percent of its network to a virtual radio access network (vRAN). The telco secured about 10MHz in the 35000MHz band (for a reported USD 18.2 M) after the commencement of spectrum allocation. That makes Cell C and Telkom the only operators yet to fully jump on the 5G bandwagon.
With Telkom potentially in the bag, MTN will, in the coming months or years, go head to head with Vodacom as they both race to expand 5G across South Africa. This might very well usher the entire continent earnestly into the fifth-generation connectivity era.