Telkom and Rain have ceased acquisition negotiations, saying that a workable deal could not be reached

Today, South African telecoms operator Telkom has announced that it has ceased negotiations with Rain over a potentially acquiring the smaller mobile provider.

Telkom had first been approached by Rain back in September last year, with Rain pitching its acquisition in exchange for fresh shares issued by Telkom. Discussions continued until a predetermined deadline at the end of December, at which point the duo were set to re-evaluate whether it was worth continuing discussions.

The deadline now passed, it seems that the two companies have decided to pull the plug on negotiations.

“After initial discussions, but prior to any due diligence, the parties have decided that a suitable transaction is not possible at this time,” said Telkom.

No specific details have been revealed as to why a deal was unreachable.

While this is presumably disappointing news for Rain, Telkom shareholders seem far more optimistic, with the news sending Telkom’s share’s surging almost 12% on the Johannesburg Stock Exchange; investors are presumably hopeful that the collapse of talks with Rain will open the door once again for South Africa’s second-largest telecoms operator, MTN, who has been interested in purchasing Telkom for many years.

MTN had attempted to acquire Telkom back in 2014, but the South African competition regulator ultimately blocked this initial tie-up attempt. Since then, rumours of talks between the two companies have never been far away, with the duo entering into official talks once again in summer last year.

However, when Telkom indicated that it could be interested in purchasing Rain, who had approached the larger telco seeking a buyer in September, the discussions with MTN were quickly brought to a close.

Now, with Rain out of the picture, Telkom’s acquisition by MTN could once again become a very real possibility. If such a merger were to materialise, it would immediately create a new market leader in the mobile sector, overtaking current hegemon Vodacom.

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