MTN in talks to acquire South African Telkom, authorities object deal
The largest mobile network operator in Africa, MTN, and South African telecoms company Telkom have begun discussions regarding Telkom being acquired by MTN.
The acquisition plan, according to a release, will involve MTN purchasing the whole issued share capital of Telkom in exchange for shares, cash, or a combination of both.
Telkom continued by stating that there was no assurance that the transaction would happen and that the talks regarding a potential acquisition were still in their early stages.
Until a new notification is made, shareholders were also urged to use caution while transacting in Telkom's securities.
Despite being primarily privately owned, Telkom is today active in at least 38 African nations. The South African government owns 38% of the business.
With 34.5 million subscribers, MTN is currently the second-largest mobile operator in South Africa, trailing only Vodacom (45.7 million subscribers), while Telkom comes in third with 16.9 million subscribers. As a result, the combined company will overtake Vodacom as the largest mobile operator in the nation.
It is uncertain whether South Africa's Competition Commission will approve the transaction.
The Congress of South African Trade Unions (Cosatu) has stated that it opposes MTN's proposed acquisition of Telkom, citing earlier, more significant mergers that resulted in job losses.
The largest trade union in the nation claimed that the merging of big businesses had resulted in thousands of job losses and fostered "anti-competitive and monopolistic" behavior, such as price gouging.
Telkom is still essentially a "publicly owned corporation," according to Cosatu, with the state and the Public Investment Corporation jointly owning 51 percent or more of the business.
Since it was listed, Telkom has lost thousands of jobs, and qualified and experienced employees have been streamlined. Data and call costs in South Africa are already significantly higher than the global average and are now a significant barrier to the country's ability to build its economy and create new jobs.
Workers who must pay expensive cell phone fees and struggling SMMEs are directly impacted by this. Cosatu said the federation cannot allow a market that is currently monopolistic and replete with collusion charges to become even "less competitive."
The proposed purchase involves two businesses in a "highly concentrated and lucrative sector," the federation further urged the Competition Commission to intervene.
The Competition Commission would have to be resolute in its objections to such a takeover proposal and take into account prior pricing manipulations and other murky claims that have dogged players in the telecoms sector, according to Cosatu.
The government, the PIC, and the Competition Commission were urged to publicly reject this harmful proposal by MTN, which has a history of abusing its dominance and influence.
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