MTN has informed its shareholders that it is in talks for a Telkom takeover. An agreement will see it purchase Telkom’s entire issued share capital in exchange for shares or a cash and share combination. However, MTN said in a Friday (15 July) statement that talks are in the early stages, and there is no guarantee the transaction will go through.
If the deal goes through, it might significantly affect how much stock the Company is worth. Accordingly, MTN has advised that shareholders exercise prudence when transacting in the Company’s securities. In addition, Telkom has verified the development in a separate statement made to 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.
MTN is currently the second-largest mobile operator behind Vodacom, with 34.5 million members. In addition, 16.9 million people use Telkom’s mobile service.
In mid-morning trade on the JSE, Telkom’s share price increased by more than 25%, while MTN’s share price increased by 1% to R136.26.
Telkom is South Africa’s largest fixed-line operator. The Company has 164,000 kilometers of underground fiber. Through Openserve, the business has connected more than 2.8 million buildings with fiber and has about 10 million mobile subscribers.
It has been the foundation of the local telecoms industry for many years and is still essential to linking millions of South Africans.
Telkom Takeover and the Threat of Monopolization
Will fewer telecoms offer similar products for competition and market outcomes? In the business world, there’ll be consolidation, the emergence of mergers, and exits. But these trends have effects on both the market and individuals.
Using numbers to maintain market competition should be the prevailing story in the telecommunications industry today. But unfortunately, due to the stakeholders’ struggles to keep up, monopolization is a genuine and visible threat.
Vodacom, MTN, Telkom, and Liquid Telecom are four of the largest providers in South Africa.
MTN, the biggest mobile carrier in Africa, provides voice, data, and digital services to almost 250 million retail customers across 21 nations. The largest mobile provider in South Africa, Vodacom, provides service to 117 million subscribers around the continent.
Vodacom began offering services in South Africa in 1994, and as its business expanded, it added networks in Tanzania, the Democratic Republic of the Congo, Mozambique, and Lesotho. Customers in over 32 African nations, including Nigeria, Zambia, Angola, Kenya, Ghana, Côte d’Ivoire, and Cameroon, can also get commercial services from this Company.
More operators in the telecom industry mean that private operators will compete with one another for restricted licenses and scarce spectrum to establish themselves in the telecom industry. But, at the same time, they had to engage in a pricing war to attract customers.
Taking out Telkom will only reduce the number of telecom companies available for South Africans. In analyzing the Telkom takeover, the question remains: Can the rivalry of three top telecoms effectively produce outcomes in favor of the consumer?