The decline of Denel would compromise South Africa’s strategic independence, says chief restructuring officer (CRO) Riaz Saloojee, making the ... timely disbursal of the R3.4bn ($196m) lifeline thrown to the entity critical.
The deal, potentially valued at billions of US dollars, would combine MTN’s mobile networks with Telkom’s fibre.
“Discussions are at an early stage and there is no certainty that the transaction will be consummated. 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,” MTN said in a statement on Friday 15 July.
Telkom’s shares jumped about 30% following the joint announcement, while MTN’s increased almost 4%.
South Africa’s President Cyril Ramaphosa had ties to MTN, serving as chairman of the board from 2002 until May 2013, during his term as deputy president of the African National Congress.
Many analysts have questioned the deal’s viability in light of MTN’s history with the competition commission.
In March 2022, despite the commission agreeing to the sale of thousands of telecom towers owned by MTN South Africa to IHS Towers, it addressed “public interest” concerns, particularly the barriers to competition in the country.
“The commission was particularly concerned about the ability of SMME (small, medium and micro enterprises) and HDP (historically disadvantage people) tower vendors and independent tower operators to effectively participate in and expand in the tower infrastructure market, particularly at a time when mobile operators are considering the technical and other imperatives of rolling out 5G technology,” the commission said in a statement.
For many customers in South Africa, choosing a telecom provider is dependent on coverage and data speed and access. MTN has a 31% market share, compared to market leader Vodacom’s 42%.
MTN also clashed with the competition commission in April 2019, after the regulator deemed that data prices in the country were too high. As a result, MTN and telecom giant Vodacom were ordered to reach agreements with the commission, including implementation of “immediate reductions on tariff levels”.
The orders were a result of the data services market inquiry, which started in 2017 after high data prices in the country began to raise concerns among government ministers and the general public. MTN has 34.5 million customers in South Africa.
At the time, the commission said that “poorer consumers in South Africa are being unduly exploited relative to wealthier consumers” and that “pricing structures are anti-poor and lack transparency”.
Despite pushback from regulators and a tumultuous political and economic year, MTN made more money last year. The group recorded R181.6bn ($11.9bn) in revenue for the 2021 financial year, up from R179.3 the previous year.
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