The Competition Commission has recommended that the Competition Tribunal prohibit a merger which would allow MTN to acquire certain Radio Access Network (RAN) assets of Telkom.
The proposed deal, which has been under discussion since March 2014, would have involved a network management services agreement and reciprocal roaming agreements.
The commission found that while the proposed transaction does not involve the combination of MTN and Telkom’s mobile retail businesses, it is likely to substantially prevent or lessen competition in the market.
MTN disagrees with the ruling, believing that the deal with Telkom would have encouraged competition in the mobile market and increased efficiencies for both companies.
“The transaction between MTN and Telkom would have constituted the first RAN infrastructure sharing arrangement in South Africa between two mobile network operators and was aimed at meeting the demand in the unprecedented global shift from traditional voice to data,” said MTN.
Telkom has announced that it will not proceed with perusing the deal as they do not want a drawn out Competition Tribunal hearing. The news that the deal would not go forward caused Telkom’s share price to sink 6,4%.
The Commission found that the merger would limit the ability of Telkom Mobile to grow and independently compete against MTN and other mobile operators. “This is particularly so in the mobile data markets where future competition is likely to take place.”
It said the deal was likely to “entrench a duopolistic market structure dominated by Vodacom and MTN”.
“Such a resultant duopoly market structure is unlikely to serve customers well, particularly when considering that it is the smaller mobile operators that lower prices before the larger operators, MTN and Vodacom,” the commission said.