MTN has terminated tie-up talks with Telkom, after the telephony group failed to provide Africa’s largest mobile operator with assurances around exclusivity.
Both MTN and Telkom today informed shareholders of the withdrawal of the buyout bid.
“After extensive engagements and deliberations between the parties, shareholders are advised that the discussions regarding the proposed transaction have terminated, as the parties were unable to reach agreement to their mutual satisfaction on the process going forward,” said MTN.
Telkom cautioned investors: “MTN terminated discussions in relation to the MTN proposal on 18 October 2022, as Telkom was not in a position to provide MTN with assurances around exclusivity.
“Discussions were at an early stage and had not progressed to due diligence, nor had a binding offer been received by the Telkom board of directors.”
The development today comes on the back of a recent letter from Africa’s largest mobile operator to Telkom, raising concerns about recently announced merger discussions with Rain.
Led by CEO Ralph Mupita, MTN, which operates in 19 markets with a subscriber base of more than 270 million, intended to bring Telkom into its stable, but wanted exclusivity on tie-up discussions.
Data-only network Rain officially jumped into the race last month, expressing interest in merging with Telkom.
Telkom received a non-binding proposal from Rain on 14 September, in terms of which Rain proposed the potential acquisition of Rain by Telkom for newly issued shares in Telkom.
This proposal rubbed MTN the wrong way, leading to the letter to Telkom seeking assurances on exclusivity on merger talks. The company made the first move in July to engage Telkom on tie-up discussions.
In response to MTN’s concerns over its flirtation with Rain, Telkom took a reconciliatory stance, assuring MTN that merger talks were still on the table.
“The MTN proposal is still under consideration by both parties. The MTN proposal, if concluded, may have a material effect on the price of the company’s securities,” Telkom said at the time.
However, in announcing termination of the merger discussions today, Telkom defended its engagement with Rain, saying it “has a legal and fiduciary duty to consider all bona fide offers”.
With Serame Taukobong at the helm as CEO, Telkom says it “continues to execute its strategy to unlock value for shareholders and will provide an update to the market on progress in due course”.
Today’s development is likely to resonate well with labour unions, which were opposed to the merger.
Solidarity and the Communication Workers Union recently expressed fears of a jobs bloodbath should the MTN-Telkom merger deal see the light.
Telkom has become a prime target in the telecoms industry in recent months, as multiple suitors try to tap into the company’s extensive infrastructure to compete in the ongoing battle in the fibre market.
Telkom’s Openserve currently connects 400 000-plus homes to its fibre network, and the telephony group’s data centres and business operations are also an attraction.
Besides MTN and Rain, Toto Investments also made an offer to pick up a stake in Telkom, making an offer to government, which holds a significant share in the company.
Competition in the fibre market has intensified, following Vodacom’s move to acquire equity in Community Investment Ventures Holdings (CIVH).
The deal, which is now awaiting regulatory approvals, will see Vodacom − through a combination of assets of approximately R4.2 billion and cash of at least R6 billion − acquire up to 40% of the ordinary shares of a newly-created, wholly-owned subsidiary of CIVH (namely Infraco), which will hold CIVH’s current interests in Vumatel and Dark Fibre Africa.