Telkom CEO Sipho Maseko says if Vodacom’s bid to buy Neotel is given the green light by regulators, it could make for “formidable” competition.
Vodacom, which is South Africa’s largest mobile network with more than 30m subscribers, last year made a bid to buy fixed-line operator Neotel for R7bn.
A Vodacom-Neotel merger would mean more competition for Telkom in South Africa’s fixed-line arena. In the deal, Vodacom is also expected to acquire more spectrum, which could help the company boost its mobile broadband service offerings.
However, the Competition Commission has yet to make a decision on the proposed deal. And Vodacom said in its annual results statement earlier this year that “the delay in receiving regulatory approval for the acquisition of Neotel is disappointing” and that “this transaction has been with the authorities for approval for almost a year now”.
“It will make [Vodacom] a formidable competitor,” Maseko said. “But as I said, you can … [get tears] in your eyes and be morose and miserable about it, but actually that is the nature of the market.
“There is going to be competition. The bigger question is how do we begin to respond as a company to those sort of competitive changes in the marketplace, so that we retain our relevance and set ourselves on a path to glory,” Maseko said.
MTN and Cell C are opposing the deal.
Last year, MTN said the transaction should be blocked. Cell C also raised concerns with the Independent Communications Authority of South Africa that Vodacom could become a “super-dominant” operator if it buys Neotel.
Meanwhile, Telkom was reported last year as saying that Neotel’s wireless spectrum should be reallocated to other operators.
“It’s not even a question of being in favour of [the deal] or not; it’s a global trend that’s unavoidable where consolidation in the market has to happen,” Maseko said.
“The economics are such that if you don’t have a strong balance sheet, you don’t have strong cash flows, you don’t have scale — you won’t survive.
“So, consolidation is an inevitable mega-trend in the sector. And it’s driven by a number of things: it’s driven by convergence; it’s driven by how consumers are now looking at consumer services — not just telco services.
“So for us therefore it is not a question of whether we welcome it; it’s an inevitability and we need to then see what is Telkom’s best positioning in so far as this convergence… will be,” Maseko said.
Telkom has also positioned itself in the market in terms of acquisition deals.
Last month, the Competition Commission gave the green light to Telkom’s R2,6bn bid to buy local IT services company Business Connexion (BCX). The Competition Commission recommended to the Competition Tribunal that the merger be approved with conditions.
The deal is expected to extend Telkom’s enterprise reach in South Africa and the rest of Africa.
“[Vodacom] have gone for Neotel; we’ve gone for BCX because of the way in which our strategy is evolving and you know I hope [Vodacom] wish us luck and we wish them luck,” Maseko said. — Fin24
