MTN walks away from talks to buy Telkom

MTN has walked away from talks to buy Telkom, a deal that would have created South Africa’s largest mobile phone operator. Telkom shares sank the most since 2009, wiping out about a fifth of their market value.  

MTN ended early-stage discussions because Telkom couldn’t assure the bigger telecom company that talks were exclusive, Telkom said in statement on Wednesday, confirming an earlier Bloomberg News report. MTN hadn’t yet made a binding offer and the talks hadn’t progressed to due diligence, it said. 

MTN said separately that it didn’t ask specifically for exclusivity on the deal. Rather it wanted Telkom to stick to a “pre-agreed process of engaging on regulatory and public interest matters” without the carrier evaluating other proposals. The parties were unable to reach an agreement to their “mutual satisfaction” on the process going forward, MTN said.

Telkom shares fell as much as 25% after the announcement and had declined 22% at 11.52am in Johannesburg, valuing the company at about R17.9bn rand ($987m). That’s the biggest intraday decline since May 2009. MTN shares fell 2.2%.  

The combination would have created the largest SA wireless operator by subscribers, overtaking larger rival, Vodacom. It also would’ve been one of the largest takeovers in the country this year, according to data compiled by Bloomberg. 

The deal would have also likely raised a number of antitrust concerns, given that the number of major mobile networks in the country would have been reduced to three from four, with the vast majority of customers using the top two carriers. The companies were also concerned about getting antitrust approval for any deal, people familiar with the matter said, asking not to be identified because the deliberations were private. 

The talks initially stalled after an unsolicited approach from Rain Group, which proposed selling itself to Telkom, Bloomberg reported. 

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