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Discussions under way for MTN to take over Telkom

Africa’s largest telecoms group MTN is in discussions to take control of South African telephony group Telkom.

The companies, which are both listed on the Johannesburg Stock Exchange, confirmed the development today in separate statements on the Stock Exchange News Service.

MTN, the largest telco on the continent, operating in 19 markets with a subscriber base of more than 270 million, told investors: “Shareholders are advised that MTN and Telkom SA have entered into discussions in relation to MTN acquiring the entire issued share capital of Telkom in return for shares or a combination of cash and shares in MTN.”

Discussions are at an early stage, with Telkom and MTN saying there is no certainty the transaction will be consummated.

MTN says: “The transaction, if concluded, may have a material effect on the price of the company’s securities. Accordingly, shareholders are advised to exercise caution when dealing in the company’s securities until a further announcement is made.”

This development comes on the back of recent comments by both Telkom Group CEO Serame Taukobong and MTN Group CEO Ralph Mupita that consolidation of the telecoms sector in SA is inevitable.

Mupita asserted his views during his appearance at the Think Big series − an initiative by financial services group PSG.

At the time, Mupita posited that economies of scale and a duopolistic environment are the logical ways for mobile operators to protect their margins.

“Having a market that is saturated by a number of players is not sustainable. There is simply not a big enough profit pool to meet the return and other financial objectives of a number of industry players,” said Mupita.

“Within the next few years, we will see a sector dominated by two to three major players who have the capabilities and capacity to rally massive amounts of capital investment locally and abroad, to sustain the industry’s expansion.”

In a recent interview with ITWeb, Taukobong voiced his concerns surrounding the growing competition within the local telecoms market.

Taukobong said consolidation is inevitable as it is “like a natural movement and trend for the market to go there”.

He explained: “If we look at our market, it is not different from global trends. We have always said that South Africa does suffer a strong duopoly in MTN and Vodacom; Cell C effectively lives on MTN and I think we are seeing consolidation in all sectors of the market. MTN sold towers to IHS and we are seeing consolidation in the fibre businesses.”

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