Vodacom’s acquisition of a stake in Community Investment Ventures Holdings (CIVH) has spooked the telecoms market, setting off a fierce race for Telkom’s assets.

That’s according to analysts, who say that with the potential of a new fiber company being created by Vodacom and CIVH, telcos are re-examining the market and realizing that another major infrastructure operator, Telkom, presents an opportunity.

In November, Vodacom made a major move for CIVH’s fiber assets in a deal that will see the telco take a joint 30% stake in the newly formed infrastructure company.

The deal is now subject to antitrust approval and, if approved, Vodacom will settle the CIVH deal through a combination of cash and access to its infrastructure.

The potential for a deal between Vodacom and CIVH is fueled by fierce competition in the fiber market, and analysts believe it has rattled the market, sparking the ongoing battle for control of Telkom’s assets.

MTN kicked off the phone race last month by announcing it was in discussions to take over Telkom. Last week, only data network Rain and Toto Investments joined the competition.

For Rain, if the tie-up goes through, the data-only network hopes to create a 40 billion rand entity. Rain is valued at about 16.67 billion rand, while Telkom’s market capitalization is about 24.24 billion rand.

“I think with the potential Infraco/FibreCo being formed by Vodacom and CIVH, there is an understanding that another major infrastructure operator may be needed; there may be an opportunity to shape it,” says Dobek Pater, telecoms analyst at Africa Analysis.

“Telkom is an ideal candidate. When MTN took a different approach, other parties realized that they too could use this opportunity to improve their position. Toto Investments (the consortium) is more speculative, looking to expand its infrastructure investment portfolio and hoping to do so relatively inexpensively.

“If we do see the emergence of a stronger entity involving Vodacom, the DFA [Dark Fibre Africa] and Vumatel, then it would make sense for Telkom to become part of the larger organization as well.

“Even so, Telkom is struggling and forming into a larger entity with a larger mobile subscriber base and enterprise-focused services would improve Telkom’s (or the combined entity’s) market position,” comments Pater.

Agreeing, Peter Takaendesa, head of equities at Mergence Investment Managers, says the Vodacom-CIVH deal has opened up a “constructive discussion about Telkom’s assets” as telecoms players begin to reassess their market positions.

Takaendesa says deep-pocketed MTN has been looking for viable assets for some time, and Telkom presents a great opportunity.

“With Vodacom’s agreement with CIVH, the market is clearly changing. The moment someone moves, everyone else will start to doubt and re-evaluate the market. Everyone is looking at the future at the moment and it is known that Telkom’s assets are undervalued and underutilised.”

Pater believes it will be good for the local telecoms market if Telkom accepts an offer from any of its suitors.

“Overall, this should have a positive impact as long as competition is maintained at the infrastructure level as well as at the service delivery level. Infrastructure and infrastructure products are becoming a volume play given the price/commodity decline in this market segment.

“It makes sense to have fewer large infrastructure operators while maintaining healthy competition in the retail market. It would also meet the government’s objective of less duplication of national infrastructure to focus investment on other areas of ICT and/or reduce capital/operating costs for wholesale operators to enable wholesale services to be provided at a lower cost.”

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