MTN calls off pending nuptials with Telkom SA

Marriage plans between Telkom SA and MTN seem to have imploded, with MTN walking away from talks to acquire Telkom.

In a statement published when markets opened in South Africa on Wednesday, Telkom SA confirmed that MTN had closed discussions over a possible acquisition.

The news was not well received by shareholders, with Telkom's share price on the Johannesburg Stock Exchange dropping by over 24% by 2:30pm CAT, while MTN's was down almost 3%.

"MTN terminated discussions in relation to the MTN proposal on October 18, as Telkom was not in a position to provide MTN with assurances around exclusivity," partially state-owned Telkom said in a statement.

"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," the telco's statement continued.

In a separate statement, MTN said: "After extensive engagements and deliberations between the parties, shareholders are advised that the discussions regarding the proposed transaction have been terminated, as the parties were unable to reach an agreement to their mutual satisfaction on the process going forward."

"Consequently, caution is no longer required to be exercised by shareholders when dealing in MTN securities," the pan-African operator added.

Rain waits in the wings

In response to the new developments, Rain told Connecting Africa in an email that it will not comment on behalf of Telkom SA and MTN.

"However, as Rain has stated previously, we reiterate that we believe there is a compelling business case for combining Rain and Telkom. Rain and Telkom continue to evaluate the non-binding proposal from Rain as per the Telkom SENS announcement on September 30, 2022," the data-only network added.

The talks between Telkom SA and MTN stalled when Rain offered its network up to Telkom SA in a move that stood in the way of MTN's plans to buy Telkom SA.

Telkom SA confirmed it had received a non-binding proposal from Rain in a deal which would see Telkom acquiring Rain in return for Rain getting newly issued shares in Telkom.

After Telkom appeared to be entertaining Rain's proposal, MTN responded with a cautionary statement to its shareholders saying its board of directors was considering the news of the Rain deal.

Currently Telkom is South Africa's third biggest operator with 17.6 million users in the third quarter of 2022, according to statistics from market research company Omdia.

Want to know more about telco financials, regulation and deals in Africa? Check out our dedicated Business of Tech content channel here on Connecting Africa.

Rain doesn't publish subscriber numbers but is estimated to have under 1 million users on its network, putting it firmly in fifth place behind Cell C which has around 13.4 million customers.

Vodacom remains SA's biggest operator with over 52 million users while MTN has about 36 million customers, Omdia stats show.

*Top image is of MTN and Telkom SA's corporate logos. Created by Connecting Africa.

— Matshepo Sehloho, Associate Editor, Connecting Africa