- Data network provider Rain has announced it wants to do a merger with Telkom, despite being instructed not to issue a statement by the Takeover Regulation Panel
- Telkom is currently in talks about a buyout with mobile operator MTN
Data network provider Rain has been rapped over the knuckles for announcing a planned deal with Telkom without the permission of the Takeover Regulation Panel (TRP).
Telkom is dealing with two suitors now - MTN wants to do a buy-out, while Rain wants a merger.
A Rain deal would create a third potential competitor in the local telecoms market to compete with MTN and Vodacom.
RELATED: Telkom reports Vodacom and Rain, says their spectrum agreement in fact a merger
TechCentral editor Duncan McLeod wonders if a merger makes any sense.
He writes: "Or is this simply posturing by Rain ahead of what will undoubtedly be heated deliberations about an MTN buyout of Telkom at the Competition Commission (if it gets that far)?"
Bruce Whitfield interviews McLeod on The Money Show.
'Who would have imagined that there'd be a fight over Telkom!" McLeod exclaims.
He says the legal implications of Rain's unauthorised statement raise interesting questions around the discussions it has happened to have with Telkom
If the talks do go somewhere the parties are going to have to approach the Takeover Regulation Panel for approval of their deal.
Duncan McLeod, Editor - TechCentral
During an earlier interview on Thursday, MTN Group CEO Ralph Mupita made a compelling argument for consolidation in the industry globally.
RELATED: MTN Group reports huge profit increase as Rain makes rival pitch for Telkom
But wouldn't three big players rather than two, benefit the South African consumer?
It's all going to come down to what the Telkom board decides, but the Competition Commission is probably going to look more favourably on a situation that will preserve competition in the market...
Duncan McLeod, Editor - TechCentral
...and the merger of Telkom and Rain would probably produce a stronger third player... whereas an MTN acquisition of Telkom would lead to a two-player market.
Duncan McLeod, Editor - TechCentral
Of course there are board politics too... The government directly owns 40.5% of Telkom and ultimately will have a say as to what happens to this asset.
Duncan McLeod, Editor - TechCentral
A merger with Rain would hardly be a merger of equals McLeod agrees, with no doubt that Rain is the smaller player, right now.
I asked CEO Brandon Leigh about that and he said 'we're an upstart; we've built scale and are now on the curve where we're going to start to build profitability'...
Duncan McLeod, Editor - TechCentral
Remember that ARC Investments, which owns a stake in Rain, has valued the company at a significant valuation - in fact it's valued higher than Telkom's market cap on the JSE. Whether that's a fair valuation I don't know.
Duncan McLeod, Editor - TechCentral
Scroll up to listen to the interview
This article first appeared on CapeTalk : 'Who'd have imagined a fight over Telkom!' Rain upsets buyout talks with MTN