By Andrew Bahlmann
The market obviously approves of the proposed deal as the share prices of both telcos are up.
I’m sure the proposed acquisition would not have got as far as even this preliminary public announcement without the at least informal approval of the government and the Public Investment Corporation, who together own over half of Telkom.
For the MTN Group the tie-up would help it step up local competition with the domestic business of Vodacom, the South African market leader by number of connections.
Solidifying a leading position in its home market is a natural strategic move for MTN, which had earlier announced the disposal of non-core assets and may now use that cash raised to redouble efforts in what is already a mature mobile market in Africa.
The tie-up would of course assist MTN’s 5G rollout while boosting 4G, after both it and Telkom picked up spectrum in the country’s recently completed auctions.
In what is a mature telecommunications market, acquiring new users becomes more challenging as customers find no reason to shift from one provider to another – like banking services for example. So, acquisitions become the most viable way to change market share and become more dominant.
The most competitive issue among mobile firms has become the up- and download speed increase provided by fibre and which make customers less reliant on their mobile connections.
On the one hand, Telkom has been trying to establish a presence as a fourth player in the mobile market by offering improved pricing. As an ex-fixed line operator, Telkom has made progress in providing fibre – and that most likely is what is of primary interest to MTN.
So far it all makes sense, but the four-paragraph statements issued by both provide negligible details of the deal other than that it will be a cash and shares deal, which doesn’t give away much.
The competition authorities may have the last word, but given that competition within the mobile sector hasn’t done much to reduce high prices – which on a par with First World prices – this deal may well get through.
Andrew Bahlmann is the chief executive, Corporate & Advisory, at Deal Leaders International.
BUSINESS REPORT