MTN Walks Away from Talks to Buy South Africa’s Telkom

It would seem like MTN has had enough of Rain’s never-ending relationship with Telkom. The Group has terminated negotiations to purchase Telkom. Bloomberg says that MTN claimed it withdrew from negotiations as Telkom failed to assure MTN Group that the discussions were exclusive.

In a statement to the stock exchange today, Telkom revealed that the talks had broken down, and the company’s shares dropped by as much as 25% as a result. MTN stock decreased by 2%. The two operators’ negotiations were said to have paused last week, although it was not believed that they had ended.

Another South African company, Rain, which has almost two million customers and ranks as the fourth-largest mobile provider in the nation, has interfered with negotiations. Instead, Rain has suggested that Telkom merge with it; it is believed that Telkom is taking this suggestion under consideration.

MTN’s combined 35 million mobile subscribers and Telkom’s 15 million subscribers would have outnumbered market leader Vodafone’s 45 million connections. However, Rain has persisted in its pursuit of a Telkom acquisition and earlier this month put out an official bid. The company asked Telkom to purchase Rain in exchange for shares by sending the operator a non-binding proposition.

“MTN terminated discussions in relation to the MTN proposal on 18 October 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,” Telkom said in a statement to investors published shortly after markets opened on Wednesday.

In a separate statement to investors, issued nearly two hours after Telkom’s, MTN said: “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.”

Any agreement between MTN and Telkom was always going to be complicated, not the least because it would need the government’s approval because it directly owns 40.5% of Telkom’s equity. Additionally, it would have been difficult to get the acquisition approved by both the Competition Commission and communications regulator Icasa.