No formal discussions have but taken place, and rain has not but put any monetary proposals on the desk. As a substitute, rain, which isn’t listed, has made a proper request to current to the Telkom board a proposal which might consequence within the merger of the 2 corporations.
MTN proposed a takeover deal final month which might be paid for in money and shares, and Telkom’s share worth jumped 33.3% to R44.6, valuing the corporate at about R22-billion.
Although financially profitable for Telkom shareholders, the issue with consummating this deal is that it might end in a way more concentrated telecoms market in South Africa, one thing which was already a priority for competitors authorities earlier than the deal.
A merger with the a lot smaller rain is probably not so profitable for shareholders since it might not embrace a money premium, however it might have extra of an opportunity of clearing the regulatory hurdles.
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Rain’s press assertion closely emphasises this level, saying some consolidation within the business is each fascinating and inevitable because it results in higher use of infrastructure. “It mustn’t, nonetheless, be on the expense of competitors which promotes higher entry for customers to knowledge at extra inexpensive costs.”
A ‘logical various’
The proposed merged entity would create a formidable third main participant to compete with what’s successfully a duopoly in South Africa, the corporate stated.
Though the phrases of such a transaction, comparable to valuation and construction, would nonetheless must be agreed, rain believes there’s a compelling enterprise case in combining the companies, its assertion says.
However a merger with rain can be a logical various to easily promoting to MTN “and would even be according to the pro-competitive insurance policies of Authorities”.
“The merger would convey collectively the appreciable infrastructure and cell companies of Telkom and the profitable new-age 4G and 5G companies of rain”.
Being a personal firm, rain doesn’t reveal what number of customers are on its networks, however following its formation in 2019, the corporate says it has “little debt and ample amenities to fund its progress”.
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“In step with the unique projections, it’s reaching crucial mass and achieved an EBITDA of greater than R1-billion within the yr to 2022.”
Rain has centered on constructing high-speed networks, primarily 4G and 5G knowledge networks. It now has greater than 7,500 4G base stations that present cell and glued broadband providers, and greater than 1,500 MIMO 5G base stations.
The corporate argues that the potential advantages of a Telkom and rain merger are that the variety of mixed rain and Telkom websites can be equal to that of Vodacom and MTN, and the avoidance of duplication would end in materials capital and operational price financial savings.
“Within the current profitable spectrum public sale, rain acquired extra spectrum that signalled its intention to enter the cell market. In combining their assets, a merged entity would have the ability to construct on Telkom Cell’s success in 4G and, in future, in 5G which is anticipated to feed shopper demand for quicker connectivity pushed by streaming, gaming and digital actuality,” says rain chairperson Paul Harris.
“Our crew’s expertise and experience have positioned us on the forefront of the Fourth Industrial Revolution. What’s most compelling, nonetheless, is the potential for the merged firm to quickly unlock these progress alternatives.”
Telkom responded very briefly, saying it “notes the media assertion by rain titled “rain proposes merger with Telkom” issued 11 August 2022. Telkom can verify that no provide or proposal has been obtained.” BM/DM