Telkom, Rain abandon merger talks

Staff Writer
By Staff Writer, ITWeb
Johannesburg, 11 Jan 2023

Telkom and Rain have terminated discussions relating to Rain’s proposal to merge with the majority state-owned telephony group.

This, after the African Rainbow Capital-owned data-only network Rain boldly expressed interest in merging with Telkom, in a non-binding proposal last September.

MTN had previously initiated early stage discussions in a bid to also merge with Telkom. The talks were later withdrawn after Telkom failed to provide Africa’s largest mobile operator with assurances around exclusivity.

In its shareholders update today, Telkom explains: “After initial discussions, but prior to any due diligence, the parties have decided that a suitable transaction is not possible at this time. Telkom continues to execute its strategy to unlock value for shareholders and will provide an update on progress in this regard in due course.”

The South African government owns a 40% stake in Telkom.

The telco’s fibre network, data centres and business operations are attractive in the increasingly competitive SA telecom sector. The company also has a large customer base of consumer and enterprise clients across industry verticals, and a booming mobile data business.

Analysts had previously told TWeb that if the deal had been successful, Rain and Telkom combined would have become a telco titan, with a value north of R40 billion. Rain is valued at around R16.67 billion, while Telkom’s market cap is around R24.24 billion.

The data-only network is controlled by diverse shareholders, including Quarme Private Equity (Paul Harris): 41.36%; African Rainbow Capital: 20.2%; Pluvial: 11.75%; Montegray Capital (Michael Jordaan): 11.53%; and Ata Fund 1: 6.42%.

Talks about the potential sale of Telkom have been on-and-off over the last couple of years, with the state also dabbling with the idea a few times.

Government tested the waters back in 2017, saying it would dispose of a portion of its Telkom shares to raise funds to bail out struggling South African Airways.

However, the following year former telecommunications and postal services minister Dr Siyabonga Cwele said government’s plans to sell a portion of its stake in Telkom were no longer an option.