Competition Commission rejects Telkom, MTN deal

South Africa's Competition Commission has rejected a networking sharing transaction proposed by operators Telkom and MTN South Africa.

Under the proposal the telcos wanted to expand the extent of their mutual networking sharing to achieve increased coverage for both networks. In March 2014, part-state owned operator Telkom announced it had signed a Heads of Agreement (HoA) with MTN South Africa, which provided for bilateral network roaming and the outsourcing of the operation of Telkom's radio access network.

The agreement was subject to regulatory approval, and yesterday the Competition Commission announced it has not recommended the approval of the proposal to the Competition Tribunal, based on the deal's potential to negatively impact competition in the market.

"Although the transaction does not involve the combination of MTN's and Telkom's mobile retail businesses, the commission found that the proposed transaction is likely to substantially prevent or lessen competition in the mobile services market," the Commission said.

"The access to additional spectrum capacity by MTN will confer first mover advantages to it relating to network speed, capacity and mobile offerings. 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."

As a result, the parties announced they will no longer pursue approval of the transaction.

"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 CEO, Sipho Maseko said.

"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," Maseko said.

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