Johannesburg - Telkom and MTN have called off talks around extending their bilateral roaming agreement after the Competition Commission recommended the deal not be allowed to go ahead.
In a statement to shareholders on Monday, the two companies said the commission had told them it recommended the Competition Tribunal block the deal.
No reasons were initially provided for the blocking, although Reuters is reporting that the competition authorities found the proposed transaction would substantially prevent or lessen competition in mobile services market
The commission also found the merger would effectively limit the ability of Telkom Mobile to grow and independently compete against MTN and other mobile operators, the wire service reported.
It added the commission could not see any workable remedies identified that would adequately address harm to competition arising from transaction.
As a result, says Telkom, it and MTN SA have no decided not to proceed with the transaction in its current form.
CEO Sipho Maseko noted, "while the commission’s decision is disappointing, Telkom and MTN have agreed not to proceed with the transaction, as we wish to avoid a protracted Tribunal hearing".
Maseko added in a statement, "over the past 18 months, our focused efforts to de-risk our mobile business have delivered a mobile division that is viable and sustainable. The mobile business will break even in this financial year and we are most encouraged by the stability that has been brought into our mobile environment. As previously communicated we will continue to explore all avenues to further strengthen our mobile business."
Telkom and MTN had been in discussions for more than a year over the deal, which would see Telkom and MTN extend their bilateral roaming agreements. In addition, the proposed transaction would have seen the network operators sharing radio access networks.
At the time the deal was announced, Maseko noted it would reduce the amount of capital spending the company needed to invest in its mobile arm.
Telkom Mobile, which launched as 8ta a few years ago, has 2.2 million active customers, making it the fourth largest mobile operator in SA.
In the year to March, Telkom Mobile grew its net revenue to R954 million, a 174.1% gain, and said mobile data revenue increased 50.6% to R988 million.
Telkom has been trimming its capital spending as it seeks to cut down on costs.
IOL