In April 2014, the two telecommunication networks approached the Competition Commission regarding a merger in which MTN South Africa would acquire certain radio access network assets from Telkom.
The transaction would further result in network management services and reciprocal roaming agreements whereby MTN would take over financial and operational responsibility for the roll-out and operation of Telkom’s radio access network and both companies would have roamed on each other’s mobile networks.
But the Competition Commission has recommended that the Competition Tribunal reject the proposal because the deal could be anticompetitive.
“The access to additional spectrum capacity by MTN will confer first mover advantages to it relating to network speed, capacity and mobile offerings,” said the commission 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,” added the commission.
Cell C and Telkom Mobile are South Africa’s number three and four networks respectively after dominant players Vodacom and MTN.
Ironically, the commission further explained how the deal could hurt Telkom’s mobile network company.
“Importantly, the nature of the transaction is such that Telkom Mobile’s ability to aggressively grow and respond to competition will be significantly curtailed as the mobile data capacity available to Telkom will be limited by the agreement between the merging parties whereas MTN’s capacity will not be limited,” said the commission.
“The Commission found that the merger would effectively limit the ability of Telkom Mobile to grow and independently compete against MTN and other mobile operators,” the commission added.
The Competition Commission merely provides a recommendation to the Competition Tribunal, which has the final say on mergers.
However, Telkom in a statement said its proposed deal with MTN is now off in light of the Competition Commission’s decision.
“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,” Telkom Group chief executive officer, Sipho Maseko, said in a statement.
Meanwhile, MTN also confirmed that the network sharing and roaming deal is off the table.
“MTN notes with disappointment the decision of the Competition Commission to recommend a prohibition of the proposed transaction between MTN and Telkom. As a result of an agreement between MTN and Telkom, MTN cannot pursue this transaction any further,” said Graham de Vries, who is the executive for corporate services at MTN.