Formal discussions have begun between the two operators, with the acquisition potentially creating a new market leader in South Africa

Today, MTN Group has announced it has entered into negotiations to acquire Telkom South Africa, telling shareholders to ‘exercise caution’ when dealing with the company’s securities until further announcements have been made.

Financial details of the potential takeover have not been announced, but MTN says it is seeking to purchase the entirety of Telkom, either by offering equivalent shares in MTN or by a combination of shares and cash.

MTN has been interested in purchasing Telkom for many years. Back in 2014, the South African Competition Commission had blocked an offer from MTN to buy Telkom’s radio access network due to its impact in reducing market competition, and since then murmurs of a takeover have been rife. Most recently, rumours were circulating in November 2021, with sources suggesting that Telkom had rejected a takeover offer.

Since then, however, Telkom’s chief executive has changed, with former MTN executive Serame Taukobong replacing the outgoing Sipho Maseko. This perhaps explains Telkom’s apparent willingness to engage in overt talks with MTN.

Nonetheless, MTN and Telkom were quick to stress that negotiations are only just beginning, with no deal yet finalised.

“Discussions are at an early stage and there is no certainty that the transaction will be consummated,” said the companies in a joint statement.

The merger would create a new mobile market leader, combining MTN’s 31% market share with Telkom’s rapidly growing 15% share. Current market leader, Vodacom, dominates the market with a 42% share.

As a result, the South African competition regulators would be sure to heavily scrutinise any potential deal and would likely impose strict conditions to ensure that healthy competition is maintained within the sector.

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