Telkom and MTN have decided to walk away from the deal that would have seen the former outsource management of its mobile radio access network to the latter and the two companies signing a bilateral roaming agreement.
Telkom CEO Sipho Maseko said in a statement that the two companies had decided against pursuing the deal after the Competition Commission said it would recommend that the transaction be prohibited.
“While the commission’s decision is disappointing, Telkom and MTN have agreed not to proceed with the transaction, as we wish to avoid a protracted [Competition] Tribunal hearing,” Maseko said.
“Over the past 18 months, our focused efforts to de-risk our mobile business have delivered a mobile division that is viable and sustainable. The mobile business will break even in this financial year and we are most encouraged by the stability that has been brought into our mobile environment. As previously communicated, we will continue to explore all avenues to further strengthen our mobile business.”
Could that involve a bid to buy rival Cell C? Last week, Reuters quoted Maseko as saying that Telkom would consider an acquisition of Cell C, provided the price was right.
“I’d like to do something with them. At the right price, I’m a buyer,” he is quoted as having said. He also said Telkom has a strong balance sheet, giving it the “flexibility to pursue … options”.
The Competition Commission decided to recommend that Telkom’s deal with MTN be blocked as it would “substantially prevent or lessen competition in the mobile services market”.
“The access to additional spectrum capacity by MTN will confer first mover advantages to it relating to network speed, capacity and mobile offerings. MTN would be able to gain a significant competitive and time advantage, offering network and services that cannot be significantly constrained by rivals, particularly given the market position of Cell C and Telkom Mobile,” the commission said.
It said the deal was likely to “entrench a duopolistic market structure dominated by Vodacom and MTN”.
“Such a resultant duopoly market structure is unlikely to serve customers well, particularly when considering that it is the smaller mobile operators that lower prices before the larger operators, MTN and Vodacom.” — (c) 2015 NewsCentral Media