Telkom and Rain end buyout talks

 ·11 Jan 2023

Telecommunications group Telkom says that talks with operator Rain over a potential acquisition have terminated.

In an update to shareholders on Wednesday (11 January), the group said that after initial discussions but prior to any due diligence, the parties decided that a suitable transaction is not possible at this time.

This marks Telkom bidding farewell to two suitors over the last three months after mobile giant MTN walked away from potential acquisition talks in October 2022.

MTN Group walked away from talks to buy Telkom because Telkom couldn’t assure the bigger telecom company that the talks were exclusive.

MTN first made an offer to buy Telkom in July 2022, but during discussions, Rain made an unsolicited bid to join up with the latter. The bid was formalised later in the year, which reportedly led to a breakdown in the talks with MTN.

Despite having two companies step away from merger or acquisition discussions, Telkom said that it is still looking for ways to enhance shareholder value.

“Telkom continues to execute its strategy to unlock value for shareholders and will provide an update on progress in this regard in due course,” it said.

Telkom shares were up over 7.6% on Wednesday, trading at R34.86 per share.

Reporting its interim results for the six months ending 30 September 2022, Telkom took a big hit to its headline earnings over the period.

The group reported gross operating revenue down 0.7% to R21.15 billion for the period, with earnings before interest, taxes, depreciation, and amortisation (EBITDA) down 17.3% at R4.9 billion.

Basic earnings were 52.5% lower at 131.6 cents per share (1H21: 276.8 cps), with headline earnings down 51.9% at 137.2 cents per share (1H21: 285.5 cps).

No dividend was declared, in line with the group’s three-year suspension strategy.

Telkom noted that its group revenue was under pressure, driven by a decrease in fixed, mobile and IT service spend. This was due to strained economic conditions for consumers as well as a decline in its legacy fixed business as customers migrate to fibre and LTE.

While its mobile unit showed growth, it operates in a highly competitive sector dominated by MTN and Vodacom. A tie-up between Telkom and MTN would have created the largest network operator in the country.

Read: MTN walks away from talks to buy Telkom

Show comments
Subscribe to our daily newsletter