Telco wars again?

SA’s Data-Only Rain Attempts To Cut Into MTN’s Telkom Buyout

By  |  August 17, 2022

South Africa is no stranger to dramatic telecom dealmaking, and yet again, the market’s well sought-after potential has left players jostling for a bigger cut off the unmistakably humongous pie. 

Last month, WeeTracker brought to notice that the South African unit of Africa’s biggest telco had made known its intentions to completely acquire Telkom, the third-largest player in the market. The move, fashioned to help the company outdo Vodacom’s competition, is now earnestly in the works, with discussions long underway. 

Howbeit, Rain, the fourth-largest [but mobile data-only] carrier on the turf, seems to be on a path to beating MTN to the Telkom merger. In a twisted turn of previously promising events, the African Rainbow Capital Investments-backed service fancies a tie-up with Telkom to help the duo stand a chance against the MTN-Vodacom duopoly.

As the narrative goes, Rain issued a press statement on M&A offer to Telkom, albeit to everyone’s surprise. According to the country’s Takeover Regulation Panel (TRP), the company did not follow due process, nor did it seek permission before publicizing its intentions. TRP outrightly accused Rain of flouting national regulations and rebuked its offer to Telkom. 

In a U-turn, the data-only provider, which has the backing of some of South Africa’s most prominent businessmen—including Paul Harris, Patrice Motsepe, Michael Jordaan, and Willem Roos—withdrew its announcement, however intending to tender an official and non-binding proposal to Telkom later. 

“Following engagement with the Takeover Regulation Panel, and at the TRP’s instruction, Rain hereby withdraws its press release of 11 August 2022,” the data-only network said in an official statement earlier today.

Per a Reuters publication on the matter, Telkom said should a legal offer suffice from Rain, its board would consider it accordingly. From all indications, Rain is wary of the possibility of the MTN-Telkom merger weakening its position in what is a terrifically competitive South African telecommunications market. 

Reportedly, Rain’s management believes that merging 40 percent of its operations with Telkom is a much healthier and more logical alternative to a holistic takeover by MTN, and that could be not far from valid. MTN is, after all, looking to consolidate its local rival’s capacity to expand 5G, a service Rain first brought to the country on a standalone, commercial basis back in 2018. 

Nevertheless, this is not the first telecoms acquisition drama to play out in the market; in November 2019, Telkom’s plans to acquire Cell C, a lower-tier telco, fell through all too suddenly. In the last 5 years, Telkom, once a dominant player on the landscape, has been losing market share to MTN and Vodacom’s stiff competition. 

Likewise, in 2020, Telkom cried wolf against a seemingly hushed merger between Vodacom—the largest telco in South Africa—and Rain, pointing out how the deal could compromise its position as well as that of other players. Much later, it was revealed that the merger, which brewed a potential telco war, was only infrastructure-wise. 

In the meantime, Telkom has, via the Johannesburg Stock Exchange (JSE), assured its investors that it is still in talks with MTN for the proposed amalgamation of operations. 

Featured Image: Get Mindful

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