Telecommunications company Rain is planning to hijack tech giant MTN’s planned takeover of Telkom.
Data-only network provider Rain said 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.
“Although the terms of such a transaction such as valuation and structure would still need to be agreed, Rain believes there is a compelling business case in combining the businesses,” Rain said on Thursday.
“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,” Rain stated.
In July, MTN and Telkom told their shareholders that they had entered into a formal discussion about MTN buying Telkom.
Both companies said the discussions were about MTN acquiring the entire issued share capital of partially state-owned Telkom, in return for shares or a combination of cash and shares in MTN.
If the deal goes through, this means MTN will have to buy out the government as it holds a 40 percent stake in Telkom, while the Public Investment Corporation (PIC) owns a further 14 percent of Telkom’s equity.
The companies said the discussions were at an early stage, and there was no certainty that the transaction would be consummated.
Rain said the proposed merged entity (Rain and Telkom) would create a formidable third major player to compete with what is effectively a duopoly in South Africa.
“It is a logical alternative to simply selling to MTN and would also be consistent with the pro-competitive policies of government.
“Telkom has in recent years worked to transform its business. The merger would bring together the considerable infrastructure and mobile businesses of Telkom and the successful new age 4G and 5G businesses of Rain,” Rain stated.
Following the announcement made by Rain, the Takeover Regulation Panel (TRP) lashed out at the company, as the announcement was made without the panel’s approval.
The TRP reports to the Minister of Trade and Industry. It regulates transactions that involve public companies.
“The Takeover Regulation Panel (TRP) has noted, with grave concern, a press announcement issued by rain proprietary limited (“rain”) regarding a potential offer to merge with Telkom on 11 August 2022. We wish to inform the market that the announcement was issued by rain without the prior approval of the TRP as required in terms of Regulation 117 of the Companies Regulations. Furthermore, the announcement was issued notwithstanding the TRP’s instructions to rain that no such announcement should be made without the prior approval of the TRP,“ the panel said in a statement.
“Accordingly, the publication of the announcement by rain is unlawful, and rain has been instructed to retract the announcement. In the circumstances, all parties (i.e., shareholders) and the market are advised to disregard the announcement,” the statement concluded.
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