If these talks are successful, they could lead to MTN Group acquiring Telkom in an equity/cash and stock deal.
The two companies, however, warned stakeholders that there was no guarantee that an agreement would actually be signed at the end of the ongoing negotiations. Regardless of this uncertainty, the stock market reacted positively to the news, with Telkom and MTN share prices jumping 20% and 5%, respectively.
Business Insider Africa understands the potential deal could be good for MTN Group, boosting its competition against arch-rival Vodacom Group.
MTN Group operates in more than 20 countries. And although it generates more than a third of its group’s total revenue in Nigeria, where it is a strong market leader, its presence on the home front is somewhat behind the shadow of the Vodacom group.
Now armed with cash proceeds from its recent divestment efforts, MTN is poised to consolidate its presence in South Africa; first by acquiring the small rival Telkom.
In the meantime, there is a hurdle that MTN Group may have to clear in order to acquire Telkom. As Bloomberg analysts pointed out, the deal would create a duopoly between MTN Group and Vodacom. And that would raise concerns about fair competition in the South African telecommunications industry. As such, regulators may have a tough choice in granting approval.