More telecom deals on the horizon, says MTN boss
Fixed-mobile convergence is happening in both developed and developing markets and is a trend Africa cannot avoid, Ralph Mupita notes
The head of MTN, which is in talks to take over Telkom, is anticipating a faster pace of telecom mergers & acquisitions in Africa in line with a global trend towards consolidation and increasing capital requirements to remain competitive as an operator.
About a month ago MTN made headlines when it announced a bid to take over Telkom in a deal estimated to be worth about R30bn.
With talks ongoing and details still under wraps, MTN group CEO Ralph Mupita said he could not “say much about the deal”.
“What we can say though is that we’ve been, for some time, putting forward a point of view that consolidation across markets is something that, over the medium term, we believe is inevitable.
“We are seeing the fixed-mobile convergence theme playing out in developed markets and in developing markets such as South America and South East Asia. It’s a trend we cannot avoid on the African continent,” he said on Thursday.
According to Datatec’s telecom consulting unit, Analysys Mason, consolidation is likely to be a trend for mobile operators looking to cut costs and create efficiencies. This is because many are struggling to grow in the core connectivity business, with some having branched out into revenue lines such as financial services.
Local players are hoping SA regulators will take the lead from deal activity in other parts of the world in deciding whether to allow an MTN-Telkom tie-up, Vodacom and CIVH’s R13bn fibre collaboration, and a host of other transitions happening throughout the sector.
In Europe, the merger of Orange and MasMovil’s Spanish telecom operations for $19bn is seen by many to be a test of whether European regulators are now more accepting of deals that reduce the number of mobile operators. Similar concern has been raised about MTN’s takeover bid, which is probably why local players are watching international deals so closely.
“If we are to be able to provide a world-class network to Africans, there is a level of capital investment that is going to be needed on a sustained basis. With regulatory certainty, you’ll see private capital coming to invest to ensure that people benefit from the internet and digital connectivity,” Mupita said.
While Telkom dominates the headlines, MTN has been making other deals across the business, recently selling its portfolio of masts and towers in SA to Nigeria’s IHS Towers for R6.2bn, and is progressing with finding outside investors for its financial services division.
This comes as Africa’s largest mobile operator reported that robust demand for its data and fintech services helped core profit rise by double digits in its half-year to end-June, but it is looking to increase prices in certain markets to fund the continued expansion of its network.
The group reported core profit of R43.87bn, up 15.1% in constant current terms, before one-off items.
MTN, whose shares are up almost 150% on a two-year basis, has been benefiting from rapidly rising demand for digital services, given a boost by Covid-19, while it has also been spending heavily on its network infrastructure.
Group service revenue grew 14.8% to R92.5bn in constant-currency terms, growing almost a fifth in Nigeria and around 30% in Ghana while SA registered a more sedate 4.1%.
The operator said it took a hit in SA from load-shedding, with stage 6 blackouts in June prompting its average network availability to fall to 89% in that month whereas it generally targets above 99%.
With Karl Gernetzky