Govt body asks Rain to retract its proposal to merge with Telkom

FILE PHOTO: A shopper walks past a Telkom shop at a mall in Johannesburg February 26, 2016. REUTERS/Siphiwe Sibeko

JOHANNESBURG (Reuters) - A government body has censured data network provider Rain for offering a proposal to merge with bigger rival Telkom SA saying the company had not sought prior approval.

Rain, owned by South African billionaire Patrice Motsepe, said on Thursday it had proposed a merger with Telkom in bid to trump mobile company MTN's designs to acquire Telkom.

The country's Takeover Regulation Panel (TRP), a government body, said the announcement was issued by Rain without the prior approval as required by regulations.

"The publication of the announcement by Rain is unlawful, and Rain has been instructed to retract the announcement," it said.

"In the circumstances, all parties (i.e., shareholders) and the market are advised to disregard the announcement."

Last month, country's second biggest telecom company MTN had said it was in talks with Telkom in a stock or cash-and-shares deal that could create the country's biggest telecom firm overtaking bigger rival Vodacom Group.

Analysts had said the acquisition was unlikely to pass muster with the Competition Commission as it would create a virtual duopoly in the country.

Rain said its proposed merger with Telkom would create a more competitive landscape and three big telecom players.

"It is a logical alternative to simply selling to MTN and would also be consistent with the pro-competitive policies of Government," Rain said in a statement.

Telkom shares were up over 6% at 1410 GMT after the announcement but it said in a separate statement that it has not received any proposal from Rain.

Mostsepe runs a diversified business network that ranges from mining, financial services, telecom, renewables to investments in fledgling companies through Africa Rainbow Capital (ARC) Investments.

Rain, which offers 4G and 5G data services, has been one of his fastest growing companies in the portfolio and claims to have one of the largest 5G networks globally covering over 6 million homes.

(Reporting by Promit Mukherjee in Johannesburg, Bhargav Acharya in Bengaluru; Editing by Kirsten Donovan and David Evans)

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