More Fiber or More 5G? Rain Looks to Cause a Merger Upset with Telkom
Internet service provider Rain announced earlier on Thursday that it has requested to pitch a partnership with rival Telkom to become a third major operator in the nation. A move that well poses threat to a takeover plan from MTN Group Ltd. that is now being discussed. Telkom SA SOC Ltd. responded to a remark from its smaller rival by stating that it had not received any merger proposals or offers from South Africa’s Rain.
Investment vehicles owned by Patrice Motsepe, a billionaire, and Michael Jordaan, a former bank executive, are among Rain’s biggest shareholders.
Given the size of the two businesses and their dominance in the industry, the acquisition is expected to come under close examination from the Competition Commission and other regulators. South Africa’s Takeover Panel has also instructed Rain to retract the statement because it lacked prior authorization.
According to an email response to inquiries, Telkom acknowledges the media announcement by rain headlined “Rain proposes merger with Telkom.” Rain, in a statement noted that its proposed merger would establish a strong third big competitor to compete with what is essentially a duopoly in South Africa. It points that it was more sensible than just selling to MTN and would also be in line with the government’s pro-competitive policy.
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“Some consolidation in the industry is both desirable and inevitable as it leads to better utilisation of infrastructure. It should not, however, be at the expense of competition which promotes greater access for consumers to data at more affordable prices.
“It is a logical alternative to simply selling to MTN and would also be consistent with the pro-competitive policies of government. The merger would bring together the considerable infrastructure and mobile businesses of Telkom and the successful, new-age 4G and 5G businesses of Rain.”
More Fiber or More 5G?
The proposed merged entity would create a formidable third major player to compete with what is effectively a duopoly in South Africa. In its 2022 financial year, Rain reported more over R1 billion in profit before interest, tax, depreciation, and amortization (Ebitda). Nearly 12 times as much, (R11.9 billion), was Telkom’s Ebitda in 2022. Even said, Rain insisted that it is serious about seeking a deal because there are “many” possible advantages.
Rain recounts that Due to the avoidance of duplication, there will be a substantial reduction in capital expenditures as well as operational costs when the number of Rain and Telkom sites combined is equal to that of Vodacom and MTN.
By utilizing Openserve’s fiber network and Rain’s 5G expertise, it would be possible to accelerate the nationwide rollout of 5G and increase the number of houses served. It will additionally bring in new clients as the home broadband market.
MTN is currently the second-largest mobile operator behind Vodacom, with 34.5 million members. The firm is pursuing the acquisition of Telkom, in an effort to compete with a prospective merger of Vodacom’s fiber network and Vumatel. Industry insiders think MTN isn’t after Telkom’s spectrum, but rather its huge fiber holdings.
So what’s it going to be? Which will you prefer, more fiber or more 5G? Let us know in the comment section.