MTN Group, the largest telecommunications group in Africa, is reportedly in discussions to take control of South African telephony group Telkom.
ITWeb is reporting that MTN Group and Telkom, which are both listed on the Johannesburg Stock Exchange, confirmed the development on Friday in separate statements on the Stock Exchange News Service.
MTN, the largest telco on the continent, operating in 19 markets with a subscriber base of more than 270 million, told investors: “Shareholders are advised that MTN and Telkom SA have entered into discussions in relation to MTN acquiring the entire issued share capital of Telkom in return for shares or a combination of cash and shares in MTN.”
Discussions are at an early stage, with Telkom and MTN saying there is no certainty the transaction will be consummated.
MTN says: “The transaction, if concluded, may have a material effect on the price of the company’s securities. Accordingly, shareholders are advised to exercise caution when dealing in the company’s securities until a further announcement is made.”
This development comes on the back of recent comments by both Serame Taukobong, Telkom Group CEO and Ralph Mupita, MTN Group CEO, that consolidation of the telecoms sector in SA is inevitable.
Mupita asserted his views during his appearance at the Think Big series − an initiative by financial services group PSG.
At the time, Mupita posited that economies of scale and a duopolistic environment are the logical ways for mobile operators to protect their margins.
“Having a market that is saturated by a number of players is not sustainable. There is simply not a big enough profit pool to meet the return and other financial objectives of a number of industry players,” said Mupita.
“Within the next few years, we will see a sector dominated by two to three major players who have the capabilities and capacity to rally massive amounts of capital investment locally and abroad, to sustain the industry’s expansion.”