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South Africa's third-largest mobile operator Telkom says it is considering a proposal made by Rain on 14 September that would see the partially state-owned firm issue shares and merge with the data-focused group.
Rain's public expression of interest in a merger in August had resulted in a public reprimand from SA's takeover regulator, given that it hadn't given any approvals. It also came shortly after Africa's biggest mobile operator, MTN, said it was considering buying Telkom in return for shares or a combination of cash and shares.
One of Rain's major shareholders, African Rainbow Capital, values it at about R18 billion, while Telkom is currently valued at a R23.7 billion on the JSE, and MTN is worth R225 billion.
Click here for more details about Telkom's shares.
Bloomberg has also reported that the SA government has received an unsolicited R7 billion bid for its 40.5% stake in Telkom from investment firm Toto Consortium, part of a consortium that controls a 24% stake in Richards Bay Minerals, majority owned by mining giant Rio Tinto.
Telkom had net debt of R7.5 billion at the end of March, and its board is currently considering ways to unlock value for shareholders, believing that the price at which its shares trade do not reflect the underlying value of the business.
"The Telkom board of directors, conscious of economic and market dynamics, and in accordance with its legal obligations, is considering various strategic options, including non-binding merger and acquisition proposals received to date," it said in a statement on Friday.
"The Telkom board is evaluating the Rain proposal and is not yet in a position to express a view thereon".
Rain maintains 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.
