Shares of Telkom have experienced a remarkable increase of over 13% following speculation that MTN may once again pursue a takeover of the smaller telecommunications provider. This interest primarily revolves around Telkom’s extensive fibre network, which is the largest in South Africa.
Reports suggest that MTN, the country’s second-largest mobile operator, is attempting to revive acquisition talks after an unsuccessful attempt in 2022. Industry insiders believe that the consolidation of local telecom operators is necessary to strengthen the market.
Currently, Vodacom is also in the spotlight with its bid to acquire a 30% stake in Remgro’s telecom unit, Community Investment Ventures Holdings (CIVH), which operates as Maziv. This deal, valued at approximately R13 billion, has recently received approval from competition authorities after a lengthy wait of almost four years, paving the way for further transactions within the sector.
Both Vodacom and MTN have invested significantly in expanding their mobile networks, covering 99% of the country. However, similar investments in fibre and other infrastructure will require substantial financial resources. As a result, telecom operators are exploring ways to collaborate and share risks.
Given its size and competitive position, MTN is regarded as the most likely candidate to consider making a significant financial offer. The company has repeatedly stated that building its own fibre network in South Africa is not feasible, indicating that acquiring an existing network is the preferred strategy.
Previously, MTN made a bid of around R30 billion to acquire 100% of Telkom in July 2022. However, it withdrew this offer after rival operator Rain sought to merge with Telkom. Analysts believe MTN’s primary interest in Telkom lies in its substantial fibre assets, particularly those housed in Openserve.
With a market capitalisation of about R28.4 billion, Telkom’s share price rose to R55.56, which translates to an annual gain of approximately 59%. Industry experts, such as Philip Short from Flagship Asset Management, believe that the recent approval of the Vodacom-Maziv deal could lead to increased deal activity in the sector, raising the likelihood of an MTN-Telkom merger being approved.
Short has pointed out that Vodacom now holds a significant advantage over MTN due to its access to Maziv’s fibre infrastructure. To remain competitive, MTN may need to partner with a substantial fibre network provider, with Openserve being the only viable option comparable to Maziv. This evolving landscape highlights the growing importance of fibre connectivity as telecom operators look to enhance their infrastructure.