Leading South African operator MTN and fixed incumbent Telkom dropped a planned partnership in the mobile market, after their proposal was vetoed by the country’s Competition Commission.
The rejection could make a link-up between Telkom and smaller operator Cell-C more likely.
The fixed line player, which has a small homegrown mobile business, had hoped to extend an existing roaming agreement with MTN to include bilateral roaming and the outsourcing of its mobile network to MTN, which would have also purchased infrastructure from Telkom. And MTN would have access to spectrum from Telkom for the rollout of a 4G network.
The two operators would have maintained separate mobile retail businesses.
However, the deal fell foul of the Competition Commission, which has recommended that the Competition Tribunal block the deal. The Commission said the deal would lessen competition in the mobile services market.
“The access to additional spectrum capacity by MTN will confer first mover advantages to it relating to network speed, capacity and mobile offerings,” it said in a statement.
“MTN would be able to gain a significant competitive and time advantage, offering network and services that cannot be significantly constrained by rivals, particularly given the market position of Cell C and Telkom Mobile,” it added.
The transaction would also hinder Telkom Mobile’s ability to grow, because it would have limited its access to mobile data capacity, unlike MTN. Given the growing importance of data services this was a prime concern.
Overall, the outcome of the transaction would have been to “entrench a duopolistic market structure dominated by Vodacom and MTN”. The two are the country’s leading operators, followed by cash-strapped Cell-C.
As a result of the commission’s decision, MTN and Telkom “agreed not to proceed with the transaction in its current form”.
Comments from the Telkom CEO last week indicate where its interest might be shifting.
“Cell C is an interesting proposition. I’d like to do something with them,” Sipho Maseko said in an interview with Reuters. “At the right price, I’m a buyer.”
He did not say whether talks had taken place on a possible offer.