Rain, MTN tug-of-war over Telkom

South African telecom operator Rain has been instructed to withdraw a statement regarding a proposed merger with Telkom.

The Department of Trade and Industry’s panel has instructed the telecom operator Rain to retract the statement in which Rain stated a request to present the Telkom board with a proposal to merge with Telkom.

The department indicated that Rain had no right to make the announcement without approval from the panel.

Where did it start?

Rain requested to present to the Telkom board with a proposal to merge after talks between Telkom and MTN about a possible ‘takeover.’

Rain has stepped in to put a spanner between Telkom and MTN after reports of Telkom being a takeover target of MTN.

Rain’s merger with Telkom would create a third player to compete with telecom giants Vodacom and MTN.

Rain confirmed it made a formal request, which according to the department of Trade and Industry’s panel, was too premature.

While Telkom paddles through debt of more than R8 billion, Rain CEO Brandon Leigh believes the merger of the two entities could solve Telkom’s cash-flow woes.

This follows MTN and Telkom’s announcement that they were in talks about a deal that mean MTN bought Telkoms shares.

What do we know?

That Rain, a six year old company launched by Paul Harris has noticed that Telkom has slipped behind Vodacom and MTN.

That Telkom’s market share has dropped since earlier this year as shares currently trade at two thirds of its stated net asset value of R66 a share.

Telkom’s company’s share value rose shortly after news broke that MTN had approached Telkom to acquire the business in a combination of shares and cash.

That the intent of entrepreneur Harris may see opportunity in Telkom’s Openserve fibre infrastructure.

Rain’s spirited statement for a proposed merger to Telkom states:  “Although the terms of such a transaction such as valuation and structure would still need to be agreed, rain believes there is a compelling business case in combining
the businesses.”

“The merger would bring together the considerable infrastructure and mobile business of Telkom and the successful new age 4G and 5G business of rain.

“The number of combined Rain and Telkom sites will be equivalent to that of Vodacom and MTN and the avoidance of duplication would result in material capital and operational cost saving.”

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Feature image: stock image