It is no secret that Rain is doing very well in the South African market, and is now valued at around R18 billion. News also recently broke that it could potentially be acquired by Telkom, who is struggling to penetrate the mobile internet market which Rain reigns supreme in. Now, Rain has formally made a proposal to Telkom to acquire it through the issue of new Telkom shares.
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The proposal was received by Telkom on September 14th, which it has now communicated to its shareholders. According to Telkom, its board “is evaluating the Rain proposal and is not yet in a position to express a view thereon.” It is not the only potential deal Telkom is part of, of course. There is also a possibility that Telkom and MTN could combine forces in a merger agreement.
“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 said in clear criticism of the impact of a possible MTN acquisition of Telkom.
“The proposed merged entity would create a formidable third major player to compete with what is effectively a duopoly in South Africa,” it added.
“It is a logical alternative to simply selling to MTN and would also be consistent with the pro-competitive policies of government. The merger would bring together the considerable infrastructure and mobile businesses of Telkom and the successful, new-age 4G and 5G businesses of Rain.”
“Telkom is proceeding with its strategy to unlock value for its shareholders, underpinned by the view that the Telkom share price does not reflect its intrinsic value. The Telkom board, conscious of economic and market dynamics and in accordance with its legal obligations, is considering various strategic options, including non-binding merger and acquisition proposals received to date,” Telkom said in a statement.
