After recent events involving the Central Bank of Nigeria demanding that MTN return $8.2 billion which it says MTN illegally moved out of the country it’s now reportedly said that it’s currently holding talks with Telkom over a possible merger. Both companies are dealing with major internal woes.
The report follows big setbacks at both MTN and Telkom in recent weeks.
Soon after this, the Attorney General of Nigeria made its own demands of the mobile operator, stating that it owed $2 billion in back taxes on foreign imports into the country.
Although the group has denied both claims, the crisis has wiped almost a third off its share price.
`At home, Telkom meanwhile, is currently in the middle of yet another round of retrenchments, and is offering voluntary packages to staff “as part of a review of its business operating model”.
It said in an email to staff earlier this month that it has subsidised the local mobile industry by about R70 billion since its inception. “This subsidy has mainly been a result of regulatory decisions that impacted Telkom disproportionately,” stated the email.
Telkom has also seen multiple top executives leave the business in recent months.
“During these regulatory cycles Telkom has sought to safeguard jobs from market and economic pressures. However, the cumulative effect of past regulations continues to impact our business operations.”
MTN has seen its market cap drop to R150 billion, while Telkom’s market cap is about R25 billion.
The former also currently has a roaming agreement with rival operator, Cell C.
Any deal of this magnitude however, would be hard pressed for approval from the competition authorities and regulatory bodies.
Some reports suggest that MTN is also reviewing operations in its 23 territories due to regulatory burdens.
Merger
The report added that MTN is also reviewing its operating footprint across Africa and abroad, due to regulatory burdens in many countries.
With MTN and Telkom taking strain, it is no surprise that merger talks are rumoured.
Wayne McCurrie from FNB Wealth and Investments recently stated that the two smallest mobile players – Cell C and Telkom Mobile – face tremendous challenges and will not survive unless they merge. A move to merge with MTN SA may therefore help Telkom’s mobile business.
Telkom and MTN also boast large fibre assets locally: Telkom through its Openserve division and MTN with its Supersonic fibre business.
The report noted, however, that a potential deal would need to be approved by the competition authorities and regulatory bodies – which may prove a big hurdle.
