ANC orchestrated MTN, Telkom deal

Johannesburg, 29 Nov 2007

MTN`s proposed purchase of some of Telkom`s assets was not only supported by government, but facilitated by SA`s ruling political party, ITWeb can exclusively reveal.

An ANC member has come forward to confirm that the party was "very involved" in the planning of the proposed merger. This, he says, was prompted by the ANC-led government`s desire to gain a strategic advantage in the telecoms sector.

The man, who has asked not to be identified for fear of retribution, says a group within the party met regularly and received updates on the progress of the discussions.

"The MTN/Telkom deal was being worked out with the full knowledge and participation of the ANC. As government, we saw the relationship with Vodafone and Telkom as financial, but not strategic. We believed - and still believe - that a Telkom and MTN merger would provide better strategic opportunities to government," he says.

Despite this, some members within the ANC have been "unpleasantly surprised" by news that discussions have broken down.

Known associates

Industry players have pointed out that MTN`s president and group CEO Phutuma Nhleko is no lightweight in the ANC. Over the years, Nhleko has entered into close partnerships with some influential political figures, they say.

These include president Thabo Mbeki`s former economic advisor, Wiseman Nkuhlu; former minister of justice and mineral and energy affairs and a member of the ANC`s National Executive Committee, Penuell Maduna; and leader of the ANC`s inquiry into human rights abuses and standing Constitutional Court judge Thembile Skweyiya.

The ANC insider declines to provide insight into Nhleko`s relationship with the ANC or MTN`s motivation for doing the deal. However, he is firm in his contention that MTN was in favour of establishing a strategic relationship with government.

Sidestepping authorities

Since the discussions were disclosed to the market in early September, market analysts have questioned how MTN could possibly expect to get such a deal through SA`s competition authorities.

However, having ANC backing - and, therefore, government support - could have eased this process, says World Wide Worx MD Arthur Goldstuck.

"We`ve seen it on several occasions within the telecoms arena: government sets the rules of play, but doesn`t feel those rules necessarily apply to them. Relationships between government and big business in this country are often characterised by a level of political benevolence," he notes.

However, an investor analyst who follows Telkom and MTN, rejects this suggestion.

"If government was to force competition authorities to rubberstamp the deal it would border on corruption. I can understand that pressure may be applied to speed up the investigation process, but I doubt that it would be pushed through," he says.

Meanwhile, University of Johannesburg`s head of the department of politics, Dr Pieter Fourie, says the revelation of the ANC`s involvement could result in renewed scrutiny being placed on the judges recently appointed to the Competition Appeals Court.

Earlier this month, Mbeki appointed judges Dennis Davis, Mokgadi Mailula, Francois Malan, Nonkosi Mhlantla, and Chimanlal Patel to the court.

"The appointments may not be linked to the MTN deal. But, given that insiders are saying the party saw it as 'strategic` to government, the new appointees may find themselves being surrounded by suspicion," he says.

What happened?

The ANC insider says party leaders are still trying to figure out what went wrong with the deal.

"The first hint we had that the deal was falling apart was when Reuben September was announced as CEO," he says. "We were unpleasantly surprised by the change in the plan. The internal group is still trying to find answers, but we haven`t heard yet."

Fourie says there is a possibility that the current succession battle within the ANC could have resulted in a "change of sides" within the party. This, in turn, could have impacted on the short to medium term support for the deal.

But ANC spokesperson Smuts Ngonyama has denied that he had any knowledge of such discussions within the party.

"I am part of the working group and the NEC - I have never heard of such discussions taking place or any support being given to this deal," he said.

This morning, MTN`s group executive of corporate affairs Nozipho January-Bardill referred ITWeb to yesterday`s statement to shareholders that talks with Telkom had been terminated. No further statements are being made at this time, she said.