Close Menu
TechCentralTechCentral

    Subscribe to the newsletter

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    Facebook X (Twitter) YouTube LinkedIn
    WhatsApp Facebook X (Twitter) LinkedIn YouTube
    TechCentralTechCentral
    • News

      China’s car factories run cold as price war masks deep overcapacity

      19 June 2025

      Yellow Card, Visa in deal to hasten stablecoin uptake in Africa

      19 June 2025

      Jaltech backs solar firm Wetility in R500-million capital raise

      18 June 2025

      MTN CEO edges Vodacom rival in pay stakes – but just barely

      18 June 2025

      Stolen phone? Samsung now buys you an hour to lock it down

      18 June 2025
    • World

      Trump Mobile dials into politics, profit and patriarchy

      17 June 2025

      Samsung plots health data hub to link users and doctors in real time

      17 June 2025

      Beijing’s chip champions blacklisted by Taiwan

      16 June 2025

      China is behind in AI chips – but for how much longer?

      13 June 2025

      Yahoo tries to make its mail service relevant again

      13 June 2025
    • In-depth

      Meta bets $72-billion on AI – and investors love it

      17 June 2025

      MultiChoice may unbundle SuperSport from DStv

      12 June 2025

      Grok promised bias-free chat. Then came the edits

      2 June 2025

      Digital fortress: We go inside JB5, Teraco’s giant new AI-ready data centre

      30 May 2025

      Sam Altman and Jony Ive’s big bet to out-Apple Apple

      22 May 2025
    • TCS

      TCS+ | AfriGIS’s Helen Hulett on how tech can help resolve South Africa’s water crisis

      18 June 2025

      TechCentral Nexus S0E2: South Africa’s digital battlefield

      16 June 2025

      TechCentral Nexus S0E1: Starlink, BEE and a new leader at Vodacom

      8 June 2025

      TCS+ | The future of mobile money, with MTN’s Kagiso Mothibi

      6 June 2025

      TCS+ | AI is more than hype: Workday execs unpack real human impact

      4 June 2025
    • Opinion

      South Africa pioneered drone laws a decade ago – now it must catch up

      17 June 2025

      AI and the future of ICT distribution

      16 June 2025

      Singapore soared – why can’t we? Lessons South Africa refuses to learn

      13 June 2025

      Beyond the box: why IT distribution depends on real partnerships

      2 June 2025

      South Africa’s next crisis? Being offline in an AI-driven world

      2 June 2025
    • Company Hubs
      • Africa Data Centres
      • AfriGIS
      • Altron Digital Business
      • Altron Document Solutions
      • Altron Group
      • Arctic Wolf
      • AvertITD
      • Braintree
      • CallMiner
      • CYBER1 Solutions
      • Digicloud Africa
      • Digimune
      • Domains.co.za
      • ESET
      • Euphoria Telecom
      • Incredible Business
      • iONLINE
      • Iris Network Systems
      • LSD Open
      • NEC XON
      • Network Platforms
      • Next DLP
      • Ovations
      • Paracon
      • Paratus
      • Q-KON
      • SevenC
      • SkyWire
      • Solid8 Technologies
      • Telit Cinterion
      • Tenable
      • Vertiv
      • Videri Digital
      • Wipro
      • Workday
    • Sections
      • AI and machine learning
      • Banking
      • Broadcasting and Media
      • Cloud services
      • Contact centres and CX
      • Cryptocurrencies
      • Education and skills
      • Electronics and hardware
      • Energy and sustainability
      • Enterprise software
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Lifestyle
      • Motoring
      • Public sector
      • Retail and e-commerce
      • Science
      • SMEs and start-ups
      • Social media
      • Talent and leadership
      • Telecoms
    • Events
    • Advertise
    TechCentralTechCentral
    Home » News » Analysis | Rain muddies the waters with approach to Telkom

    Analysis | Rain muddies the waters with approach to Telkom

    By Duncan McLeod11 August 2022
    Twitter LinkedIn Facebook WhatsApp Email Telegram Copy Link
    News Alerts
    WhatsApp
    Rain CEO Brandon Leigh

    “Broadband player rains on MTN’s parade.”

    “Rain clouds picture for telecoms M&A.”

    “Rain muddies the waters.”

    Rain’s left-field approach to Telkom’s board about a possible merger is going to provide endless entertainment to headline-writing subeditors in South Africa’s newsrooms.

    The executives at MTN’s Fairland, Johannesburg headquarters are less likely to be amused about Rain’s move, which emerged (coincidentally?) on the same day MTN announced its group interim results, for the period ended 30 June 2022.

    In what is clearly a surprising development, the data-first wireless broadband provider has moved to scupper MTN Group’s (already audacious, though preliminary) talks to buy Telkom, throwing its hat into the ring and saying it has approached the partially state-owned operator’s board of directors about a “merger”.

    Ignore for a moment that Rain, although growing fast, is a relative pipsqueak next to Telkom

    Ignore for a moment that Rain, although growing fast, is a relative pipsqueak next to Telkom. Does a merger make any sense? Or is this simply posturing by Rain ahead of what will undoubtedly be heated deliberations about an MTN buyout of Telkom at the Competition Commission (if it gets that far)?

    Is Rain simply trying to make it (more) difficult for MTN to get its (possible) acquisition of Telkom across the line? Or perhaps it’s positioning itself to extract concessions from regulators, including the commission, well in advance.

    After all, MTN and Telkom are fierce competitors. Their combination could make Rain’s life more difficult.

    “No,” Rain CEO Brandon Leigh tells me. The company is “very serious” about its proposal. “We believe it is achievable.”

    ‘Triopoly’

    Let’s have a look first at exactly what Rain is proposing.

    It’s all fairly nebulous at this stage. Rain said in a statement that it has “made a formal request to present the Telkom board with a proposal which would ultimately result in the merger of the two companies”.

    That’s not an offer to purchase. The “terms of such a transaction, such as valuation and structure, would still need to be agreed”.

    “Our proposal is pro-competitive, pro-consumer and will create a more competitive ‘triopoly’ rather than creating an entrenched duopoly,” Leigh tells me.

    In its statement, Rain said there is a “compelling” case in to combine the businesses. “Some consolidation in the industry is both desirable and inevitable as it leads to better utilisation of infrastructure. It should not, however, be at the expense of competition, which promotes greater access for consumers to data at more affordable prices,” it said pointedly.

    “The proposed merged entity would create a formidable third major player to compete with what is effectively a duopoly in South Africa. Telkom has in recent years worked to transform its business, and a combination of Telkom and Rain would enable it to continue to meet these objectives while accelerating its growth. It is a logical alternative to simply selling to MTN and would also be consistent with the pro-competitive policies of government.”

    This is all likely to be music to the ears of trade, industry & competition minister Ebrahim Patel and his enforcers at the Competition Commission, who have taken a dim view – rightly or wrongly – of concentration in the mobile market. The commission is likely to look more favourably on a merger of relative minnows (Telkom and Rain) than on the number-two player and a member of the “duopoly” (MTN) swallowing the number-three player.

    So, yes, Rain could really end up – cough – raining on MTN’s parade when it comes to regulatory hearings about a tie-up.

    Rain describes itself as a “disruptive start-up [that has become] an established and fast-growing company with little debt and sufficient facilities to fund its growth”. “In line with the original projections, it is reaching critical mass and achieved Ebitda of over R1-billion in the year to 2022,” it said.

    But no matter how much Rain fluffs out its tail feathers, there’s no argument that it is still small next to Telkom. It has no fibre infrastructure, whereas Telkom has more than 160 000km nationally; and it offers no fibre-to-the-home services either, whereas Telkom is in a race with Remgro’s CIVH for market leadership. Telkom also has a bigger portfolio of towers and owns an enterprise IT services company (BCX), among other assets.

    Politics

    Given government holds a 40.5% direct stake in Telkom, any deal is going to require political support. MTN may have already secured that, through lobbying by its politically connected chairman, Mcebisi Jonas, by selling an MTN/Telkom combination as creating a black-led African telecoms champion in which government remains a significant minority shareholder.

    Would Rain be able to garner political support for its proposal? Patel and the Competition Commission may favour it for competition reasons. Will that be enough?

    “As we read it, it is unlikely that government will have a significant stake in MTN Group after they have absorbed Telkom,” Leigh tells me. “We are proposing a merger and the structure has not been addressed as yet. We will not address relative values until we prove the business case, which believe is very compelling.

    “Bear in mind that Rain is just six years old in a massive market, and has just achieved critical mass – so, future growth will be at better margins. We are at different points of the value curve and have great operational leverage. 5G will accelerate growth and we are positioned for it.”

    There’s certainly never a dull moment in South Africa’s ICT industry. Maybe, just maybe, in a year’s time those subeditors will be writing headlines about a certain upstart succeeding in washing a competitor’s bid away.  — (c) 2022 NewsCentral Media

    • Duncan McLeod is editor of TechCentral

    Click here for more leading South African tech news



    Brandon Leigh CIVH Competition Commission Ebrahim Patel Icasa Mcebisi Jonas MTN MTN South Africa Rain Remgro Telkom
    Subscribe to TechCentral Subscribe to TechCentral
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email Copy Link
    Previous ArticleRain wants to merge with Telkom: asks to pitch proposal to board
    Next Article Get your brand in front of TechCentral’s amazing audience

    Related Posts

    MTN CEO edges Vodacom rival in pay stakes – but just barely

    18 June 2025

    TechCentral Nexus S0E2: South Africa’s digital battlefield

    16 June 2025

    MVNO boom is reshaping South Africa’s mobile market

    12 June 2025
    Company News

    Disrupt first, ask questions later – the uncomfortable truth about incident response

    18 June 2025

    Sage brings together HR leaders to explore the future of payroll and people management

    18 June 2025

    Altron: a brand journey, a birthday celebration and a bet on Joburg’s future

    17 June 2025
    Opinion

    South Africa pioneered drone laws a decade ago – now it must catch up

    17 June 2025

    AI and the future of ICT distribution

    16 June 2025

    Singapore soared – why can’t we? Lessons South Africa refuses to learn

    13 June 2025

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2025 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.