Shares of SA's third-largest mobile operator Telkom leapt by double digits on Wednesday afternoon, after it said merger talks with data-only operator Rain had been called off.
The parties had determined that "a suitable transaction is not possible at this time", Telkom said in a brief statement, with this being determined after initial discussions, but before any due diligence.
Telkom's shares jumped as much as 11% to R35.95 on Wednesday afternoon, but they have still fallen more than 30% over the past year. Click here for more details on Telkom's shares and other information.
Rain had maintained a merger with Telkom could create a "5G powerhouse" and also mooted other benefits, including in terms of infrastructure, while also avoiding the creation of a mobile "duopoly" in the form of Vodacom and MTN.
However, Telkom's failure to offer MTN exclusivity during their takeover talks had resulted in MTN walking away from discussions in October, prompting Telkom's shares to crash by more than a quarter on that news.
In July 2022, MTN had offered to buy Telkom in return for shares or a combination of cash and shares, while in September, Rain had essentially asked for a merger.
Makwe Masilela, who heads up Makwe Fund Managers, said the exit by Rain was likely to bring MTN back to the table. It was worth noting that MTN had only walked away from Telkom due to the lack of exclusivity in talks, had recently indicated it still saw a tie up as compelling, while Telkom had also indicated it was still open to further discussions.
"MTN needs this deal. It's all about fibre," he said. "Telkom is in a dominant position, with over 150 000 km of fibre, while Vodacom has teamed up with Vumatel."
Without Telkom's fibre assets, MTN would need to spend significantly on its own infrastructure, Masilela added.