Rain wants to merge with Telkom

Rain has requested an opportunity to present a proposal to the Telkom board to merge the two telecommunications companies, MyBroadband reported.

Rain believes there is a compelling business case in combining Telkom and Rain and creating a 5G powerhouse and a strong third player to compete with Vodacom and MTN.

The terms of a transaction, like valuation and structure, would still need to be agreed upon if Telkom is open to such a deal.

Rain said a merger offers a more pro-competitive alternative than the government selling Telkom to MTN.

“Some consolidation in the industry is both desirable and inevitable as it leads to better utilisation of infrastructure,” Rain said.

“However, it should not be at the expense of competition which promotes greater access for consumers to data at more affordable prices.”

Although Telkom is significantly larger than Rain, the latter offers Telkom an easy and affordable entry into the 5G market.

Rain has over 7,500 4G base stations providing mobile and fixed broadband services and over 1,500 massive MIMO 5G base stations.

Its network covers over 6 million homes, and Rain said it has one of the largest Stand Alone 5G networks globally.

“In 2021, Rain bought a substantial proportion of the 5G routers sold globally to enable its customers to connect their homes to its 5G network,” Rain said.

“The number of combined Rain and Telkom sites will be equivalent to that of Vodacom and MTN, and avoiding duplication would result in material capital and operational cost savings.”

Rain chairman Paul Harris said there is great potential for a merger with Telkom to unlock growth opportunities.

“Rain’s prospects as a niche player are great. However, the option to combine forces with Telkom would take the merged company to the next level and benefit both Telkom and Rain stakeholders,” said Harris.

“It is a pro-consumer option in line with Government policy, and the business case looks compelling.”

Rain’s announcement comes less than a month after MTN and Telkom announced they were in discussions about MTN acquiring Telkom.

The announcement was well-received by investors, with Telkom’s share price jumping 30% and MTN’s stock price increasing 5%.

The excitement around a deal between MTN and Telkom is warranted.

A merger between MTN South Africa and Telkom makes sense operationally, as it will create a telecoms powerhouse with tremendous scale.

It will combine MTN’s deep pockets and mobile market strength with Telkom’s extensive fibre, tower, and property assets.

A merged entity will also be well-positioned to challenge Vodacom’s dominance in South Africa and unlock shareholder value.

A deal between MTN and Telkom will face tremendous regulatory scrutiny, and Rain’s proposal may complicate matters further.