Telkom in Talks With MTN South Africa on Mobile-Network Sharing

Telkom SA SOC Ltd. (TKG), Africa’s largest landline provider, is in talks with MTN (MTN) Group Ltd. to share the companies’ mobile-phone networks.

The discussions focus on the “potential outsourcing of the operation of the Telkom radio access network to MTN,” Pretoria-based Telkom said in a statement today. The companies may also strengthen their relationship to include roaming on each other’s networks, it said.

A deal between the two South African carriers would help Telkom reduce the cost of its wireless business while giving MTN, the continent’s largest mobile operator, access to some of Telkom’s spectrum, a person familiar with the matter told Bloomberg News this week. A successful deal “may have a material effect on the price of Telkom’s securities,” Telkom said.

Telkom shares increased as much as 5.1 percent, the most on an intraday basis in more than a month, and traded 2.8 percent higher at 33.09 rand as of 12:02 p.m. in Johannesburg. The stock has gained 18 percent this year.

MTN has been reducing its network of towers by selling and then leasing them in Rwanda, Zambia, Cameroon and Ivory Coast as it cuts operational expenditure. Telkom paid 1.1 billion rand ($103 million) to other mobile network operators in the six months through September, compared with 1.48 billion rand a year earlier.

Telkom, which has had five leaders since 2007, is struggling to revive revenue among consumers in a country that has leapfrogged fixed-line technology in favor of smartphone devices that are driving a boom in data usage across Africa. The company is trying to lower expenses, especially in its mobile business, which Chief Executive Officer Sipho Maseko said he wants to reduce by at least 50 percent.

To contact the reporter on this story: Christopher Spillane in Johannesburg at cspillane3@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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