Paula Lakhoff

| Bruce Whitfield interviews TechCentral editor Duncan McLeod about Rain’s plans to merge with Telkom.

– Data network provider Rain has announced it wants to merge with Telkom despite being told not to make any announcements by the Takeover Regulatory Panel

– Telkom is currently in buyout talks with mobile operator MTN

Data network provider Rain has been slammed for announcing a planned deal with Telkom without approval from the Takeover Regulatory Commission (TRP).

Telkom is now dealing with two suitors – MTN wants to buy out the stake and Rain wants to merge.

The Rain deal will create a third potential competitor in the local telecommunications market to compete with MTN and Vodacom.

RELATED: Telkom reports Vodacom and Rain say their spectrum deal is effectively a merger

TechCentral editor Duncan McLeod wonders if the merger makes sense.

He writes: “Is this just Raine’s posturing ahead of what is sure to be a heated MTN Telkom buyout debate at the Competition Commission (if it gets that far)?”

Bruce Whitfield interviews McLeod on The Money Show.

“Who would have thought there would be a fight over Telkom!” MacLeod exclaims.

He says the legal implications of Rain’s unauthorized statement raise interesting questions around the discussions that took place with Telkom

If negotiations do proceed, the parties will need to apply to the Takeover Regulatory Panel for approval of the transaction.

Duncan McLeod, Editor – TechCentral

In an earlier interview on Thursday, MTN Group CEO Ralph Mupita made a compelling case for industry consolidation globally.

RELATED: MTN Group reports huge profit rise as Rain takes on rival Telkom

But wouldn’t three big players, rather than two, benefit the South African consumer?

It will all come down to what the Telkom board decides, but the Competition Commission is likely to take a more favorable view of a situation that preserves competition in the market…

Duncan McLeod, Editor – TechCentral

…and the merger of Telkom and Rain would likely lead to a stronger third player… while Telkom’s acquisition of MTN would lead to a two player market.

Duncan McLeod, Editor – TechCentral

Of course, there’s also board politics… The government directly owns 40.5% of Telkom and will ultimately have a say in what happens to that asset.

Duncan McLeod, Editor – TechCentral

A merger with Rain would hardly be a merger of equals, McLeod agrees, without doubt that Rain is now a smaller player.

I asked CEO Brandon Lee about this and he said, “we’re an upstart; we’ve built scale and now we’re on the curve where we’re going to start building profitability’…

Duncan McLeod, Editor – TechCentral

Remember that ARC Investments, which owns a stake in Rain, has valued the company at a significant valuation – in fact it’s valued higher than Telkom’s market cap on the JSE. I don’t know if this is a fair assessment.

Duncan McLeod, Editor – TechCentral

Scroll up to listen to the interview

This article first appeared on CapeTalk: “Who would have imagined the fight over Telkom!” Raine breaks off buyout talks with MTN

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