Telkom and MTN South Africa signed a preliminary agreement in March 2014 to extend their existing roaming agreement to include bilateral roaming and outsourcing of the operation of Telkom's radio access network to MTN. Telkom first launched its own mobile network in 2010, but has struggled to build a market position in the face of tough competition from the three existing operators in South Africa. The agreement with MTN was expected to lower its operating costs and avoid further network investment, while focusing on services provision.
Maseko said Telkom has focused since first announcing the agreement with MTN on "de-risking" the mobile business, to deliver a division that is "viable and sustainable". As a result, the mobile business should break even this financial year.
The Commission said the transaction between MTN and Telkom would impact the structure of the mobile market in South Africa, and would "prevent or lessen" competition in the mobile services market. In partuicular, MTN would gain a significant advantage through access to Telkom's spectrum holdings, and the smaller players Telkom Mobile and Cell C would likely not be able to compete with MTN's strong position. Telekom would also face restrictions on its ability to grow due to limits on its data capacity available under the MTN deal.
The Commission said it feared the deal would strengthen the duopolistic tendency in the market with MTN and Vodacom as dominant players, and the regulator received opposing comments from several third parties in its investigation of the proposed transaction. MTN and Telkom were also unable to provide suitable remedies to address the competition concerns.
