Telkom and Rain terminate merger talks

On Wednesday, South African mobile network operator Telkom announced that it has terminated merger talks with data-only network operator Rain. 

In a statement on the Joburg Stock Exchange News Service (SENS), Telkom announced that the two parties ended the discussions after a mutual agreement that a suitable transaction would not be possible at this time. Telkom’s share price jumped by 11% after the announcement.

Telkom had announced in September last year that it had received and was evaluating a merger offer presented by Rain. Rain had initially announced an intent to submit a proposal to Telkom after the former announced acquisition talks with MTN, but the operator was forced by the Takeover Regulation Panel (TRP) to retract the statement, citing Rain ‘s failure to follow the proper channels.

Telkom and Rain ending their talks means MTN, who cited Telkom’s flirtations with Rain as the main reason for walking away from their acquisition talks in October last year, might be tempted to return to the negotiating table with Telkom.

And indeed, MTN does need to get back to the negotiating table. With its main competitor Vodacom making major strides on the fibre front and Middle Eastern telco giant, Etisalat considering a takeover of Vodacom group, the parent company of Vodacom South Africa, MTN needs to make a move to stave off Vodacom.

Telkom presents a good opportunity for MTN to eclipse Vodacom on the fibre front. Its fibre subsidiary, Openserve, is currently the biggest fibre network provider in South Africa and access to it would propel MTN to the top of the fibre charts.

A strong fibre presence will give MTN a major advantage in its quest for 5G dominance in South Africa, a lucrative industry still in its infancy. In order to ensure that its 5G coverage is as wide as possible and MTN is able to achieve its projected performance goals, a lot of fibre backhaul is required, which is whereTelkom’s Openserve comes into play.

Rain is yet to put out a statement regarding the termination of the merger talks.