Lesley Stones
7 January 2009
Johannesburg — CELLULAR operator MTN has won its bid to buy airtime retailer iTalk, despite a last-minute bid by Huge Group to scupper the multimillion-rand deal.
MTN was granted permission to buy Durban-based iTalk by the Competition Tribunal yesterday, just hours after the tribunal heard Huge 's claim that MTN would probably close iTalk down if the deal went through.
That allegation was rejected immediately by MTN, which said iTalk would be merged into its operations to strengthen its presence in KwaZulu-Natal .
Huge had been trying to sink MTN's bid to acquire iTalk for months, but its efforts looked increasingly unlikely to succeed as its CEO, James Herbst, presented his arguments against the potential deal to the tribunal.
MTN owns 41% of iTalk, which sells airtime and handsets on behalf of the operator. MTN belatedly chose to exercise its pre-emptive right to acquire the other 59% last year, after Huge had already negotiated a R511m deal to acquire that majority stake for itself.
Herbst told the tribunal that Huge was no longer interested in buying iTalk, but still believed that MTN should not be allowed to buy it either. Yet Herbst admitted that there would not be any substantial decline in the level of competition if MTN was permitted to make its move, since iTalk's subscriber numbers were negligible.
The retailer had about 130000 customers last year, but it had lost about 30000 during the conflict over its future ownership, Herbst said.
Though iTalk did not have much market share, Huge had wanted to buy the business to acquire the iTalk brand name and for the valuable right to resell MTN's services at a favourable profit margin. MTN was not interested in the subscriber base, Herbst said, and only wanted to take over iTalk so it could discontinue the business and thereby end the discounts iTalk offered.
MTN SA's MD, Tim Lowry, denied that, saying iTalk's customer base was small but valuable because it included many high-usage, high-revenue consumers. Users would not be any worse off once MTN took over and offered them new contracts as their deals expired, he said.
MTN would retain some of iTalk's distribution outlets and, though some outlets would be lost, MTN wanted to expand its own distribution channel and that should create opportunities for affected staff, Lowry said.
"The people within iTalk are important to MTN," he said, and iTalk's 250 staff would join its own 800 people in KwaZulu-Natal and their call centres would be merged.
The Competition Commission had already examined the proposed deal and recommended that it be approved by the tribunal.
The commission's analyst for mergers and acquisitions, Thabelo Masithulela, said the industry and consumers had been consulted and issues raised by the rivals had been examined. "We don't find any substantial issues emanating from this transaction. The transaction would not result in any substantial lessening of competition," he said.
The commission's research had found that iTalk had a very small share of the market, and MTN would see little more than a 1,4% rise in its own market share if the deal went ahead. Nor had iTalk shown any interest in offering services on the Cell C or Vodacom networks, so its loss to the industry would not affect the other operators.
The tribunal announced its approval of the deal within hours, though MTN had expected to wait days to hear the verdict.
MTN will appear before the tribunal again tomorrow , when its R1,4bn bid to acquire the African operations of networking company Verizon Business will be fiercely opposed by the listed hi-tech company Altech.
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