Telkom and Rain talks are over – for now

Telkom and Rain talks are over – for now

South Africa's Telkom and Rain appear to have abandoned plans for the country’s third-biggest operator to buy the major name in fixed wireless access (FWA) service provision. But what could this mean for other potential mergers or acquisitions in the telecoms space?

Both parties had agreed to continue discussions until the end of December, by which time they suggested they would decide whether to engage in more serious talks about a combination of their businesses.

Telkom has been quoted as saying: “After initial discussions, but prior to any due diligence, the parties have decided that a suitable transaction is not possible at this time.” It’s not clear why this is – or indeed whether talks might one day resume.

According to the Tech Central website, the news immediately boosted Telkom’s share price because, it seems, some investors hope that the end of the Telkom-Rain talks could see MTN Group try another approach for Telkom.

In fact, as we have reported, MTN, the second-biggest player in the market, and Telkom did engage in preliminary discussions last year, but when Telkom also showed interest in a potential deal with Rain, MTN ended the talks. It seems to have felt that having Rain involved in discussions would unnecessarily complicate what would already be a difficult deal to get across the line. Rain, meanwhile, had pitched a Rain-Telkom deal as a more logical combination than one involving MTN and Telkom.

At the time Telkom commented that it “was not in a position to provide MTN with assurances around exclusivity".

As for what happens now, Telkom has made no comment about MTN, simply saying that it “continues to execute its strategy to unlock value for shareholders and will provide an update on progress in this regard in due course”.

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