MTN scuppers Huge deal

Johannesburg, 30 Jun 2008

MTN has scuppered a R511 million deal for Huge Group by buying the remaining 59% of iTalk Cellular.

The cellular giant previously owned 41% of iTalk, and has exercised its pre-emptive rights to purchase the other 59% from iTalk's owners, the Bebinchand Seevnarayan Trust. MTN previously declined to exercise these rights, but changed its mind after the Huge Group's bid.

The trust initially agreed to sell these shares to Huge Group, which received Competition Tribunal approval to buy the shares earlier this year.

However, Huge Group CEO Anton Potgieter says the company has not abandoned its own iTalk transaction.

iTalk Cellular is an exclusive MTN service provider, with 11 shops of its own, and a national network of 100 dealers.

Huge Group announced the iTalk acquisition in November, and was quick to defend the R511 million price to which it had agreed.

Huge financial director James Herbst said earlier this year that with the inclusion of iTalk, the group would control revenue of more than R1 billion.

Competition challenge

MTN SA MD Tim Lowry says the acquisition is in line with the company's strategic vision and will add value to its business. "Through these deals, we are enhancing our value proposition, building capacity and broadening our reach to enhance our product and service offerings to customers and clients. The iTalk Cellular acquisition will strengthen our distribution across SA," he says.

Potgieter says Huge is still in with a chance as the MTN bid is not a done deal. He says there is a possibility that the Competition Commission will not allow the MTN deal.

He says Huge Group intends to oppose the deal between MTN and iTalk on the basis that the deal substantially lessens competition in the mobile telecommunications market.

"In this regard, Huge Group intends to make formal and legal submissions to the competition authorities. Huge Group would not oppose the transaction between MTN and iTalk if it felt that its opposition was without merit."

Potgieter says Huge Group is of the view that its case has substantial merit and the company remains confident about its position.

He says in the event that the deal between MTN and iTalk does not receive Competition Tribunal approval, then Huge Group will proceed to buy the remaining shares in iTalk Cellular.

For now though, Potgieter says it is business as usual and that Huge Group will effectively have one further hoop to jump through in its effort to acquire a controlling interest in iTalk.

The Huge Group share closed at R3.49 on the JSE on Friday, up 9c or 2.7%, while MTN gained 70c or 0.5%, to close at R129.90. Huge was untraded early this morning, while MTN was trading at R128 - down R1.90, or 1.5%.