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MTN reportedly mulling takeover of Telkom South Africa

Consolidation of the South African telecoms market may be on the cards if a report from Bloomberg has any substance.

Those handy ‘people familiar with the matter’ told Bloomberg that MTN Group – Africa’s largest operator group – recently made a takeover approach for Telkom South Africa. Having said that, when Bloomberg asked MTN for confirmation all it got was this statement: “There is no deal on the table in relation to this matter.”

All this points to a trial balloon exercise in which someone on the inside leaks a potential development to the media at an early stage to gauge market and public reaction. Assuming preliminary conversations have already taken place, at this stage the whole thing could be easily called off with minimal adverse consequences beyond a rumour that never substantiated itself. It could also have been timed to coincide with the big AfricaCom trade show.

The easy assumption would be that MTN leaked the story but, given that Telkom SA is 40% owned by the state, it seems just as likely in this case that the South African government may have done it. Since it would involve a merger of the country’s second largest mobile operator with the owner of its largest landline network there would be significant competition concerns, so the government would presumably want to get a sense of the political consequences of waving it through.

It looks like MTN Group has cash to burn these days, having consolidated its operations and seeing is share price soar this year. The imminent granting of a mobile money license in Nigeria hasn’t done it any harm, either. MTN and Telkom’s South African mobile subscribers combined would still be fewer than Vodacom’s so there would still be competition on that side of things. On the other hand, if this move happens it would leave third-placed Cell C very exposed.


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