In South Africa, state-owned telco Telkom has confirmed that it received an offer from Rain in September proposing that Telkom acquire Rain in exchange for shares.
In a statement, Telkom notes, “Shareholders are advised that Telkom received a non-binding proposal from Rain on 14 September 2022, in which Rain proposes the potential acquisition of Rain by Telkom for newly issued shares in Telkom.”
The company said its board was evaluating the proposal and was not yet in a position to express a view thereon.
On 11 August 2022, Rain released a statement stating it had made an offer to Telkom over a potential merger. However, it had to retract this after the Takeover Regulation Panel (TRP) reprimanded it over the announcement.
Telkom also denied receiving the merger offer in a Sens announcement the day after Rain’s statement.
In response, Rain said it would table an official offer to Telkom’s board before the end of September 2022.
According to BMA sources, Rain believes a merger with Telkom could create a strong third mobile network operator and “5G powerhouse” in South Africa.
On the other hand, Telkom is in discussions with MTN over a potential buyout that would see MTN obtaining the entire issued share capital of Telkom in return for shares or a combination of cash and shares in MTN.
However, industry experts believe it would be difficult for the companies to convince the Competition Commission that the deal would not result in less competition in the telecoms industry.
MTN and Telkom are currently the country’s second and third-largest mobile network operators. However, a takeover could make it more difficult for small players like Cell C and Rain to compete, evoking fears of a renewed duopoly in the market shared by MTN and Vodacom.