According to persons familiar with the matter, MTN Group Ltd. recently made a takeover approach for Telkom SA SOC in a deal that would have merged South Africa’s second and third largest telecommunications operators.
According to the persons who asked to remain anonymous as the talks are confidential, Telkom has shown no interest in the sale. However, according to the sources, it is uncertain whether the larger rival will continue its chase.
Following enquiries from Bloomberg, MTN issued a statement saying, “There is no deal on the table concerning this matter.” Telkom did not respond immediately to a request for comment.
MTN is flush with cash after a multi-year asset-disposal program and wants to expand its core business. A merger with Telkom, which has a market value of US$1.9 billion, would help the company reduce the gap on rival Vodacom Group Ltd. MTN’s shares have increased by almost 177 per cent this year, valuing the company at around US$21 billion.
The two parties agreed on a multi-year roaming arrangement last week, under which Telkom will utilise MTN’s network. There is also some overlap in their business strategies, as MTN is working on a sale-and-leaseback arrangement for its South African towers, and Telkom is separating its towers business in preparation for a prospective listing of the unit.
Telkom handles South Africa’s largest landline network and sells mobile phone packages, among other services, with the government owning over 40 per cent of the company. According to Bloomberg data, Telkom’s other major stakeholder is the Public Investment Corporation, a state-owned pension fund manager that owns 14 per cent of the company. According to the persons, for a deal to be approved, the government would have to endorse it, and several competition issues would have to be addressed.
MTN has been rapidly paying debt as it disposes of non-core assets, including a gradual sell-down of a stake in recently listed IHS Towers, the sale-and-leaseback of its South African towers, and its withdrawal from certain Middle Eastern operations.
