MTN, Verizon to shake market

By Candice Jones, ITWeb online telecoms editor

Johannesburg, 05 Jun 2008

A merger between MTN and Verizon Business will shake up the local telecommunications market, says an analyst.

FMTech reported that MTN has purchased Verizon Business for R1.4 billion, beating out Allied Technologies (Altech) in a bid for the Internet service provider (ISP). The deal is expected to be officially announced next week.

Neither company has confirmed the acquisition. However, Verizon says: "From time to time, Verizon Business receives various expressions of interest in its operations around the world, and SA is no exception. Any such approaches are always considered very carefully, as is the company's fiduciary duty.

"The South African market is one that is both important and highly successful for Verizon Business. Consistent with its global strategy, the company is focused, as ever, on delivering advanced communications and information technology solutions to its enterprise business customers based in SA, and worldwide."

Market shake-up

Irnest Kaplan, head of Kaplan Equity Analysts, says a merger between the companies will be significant for the local industry. "In the fixed-line space there are really a few dominating players, Telkom and now Neotel, with smaller players springing up with alternatives to fixed voice offerings."

He says the most prominent alternative players include Internet Solutions and Vox Telecoms. "A merger between MTN and Verizon Business will make it harder for alternative players to spring up in the market."

According to Kaplan, in order to succeed in the alternative voice space, companies need a customer base, and experience in voice and data. "Verizon would bring the data experience and a customer base, while MTN would provide the voice experience."

He says if a Verizon deal does go through, the impact on MTN will be small. "While Verizon is a significant ISP, second or third largest in the country, MTN's dealings are across Africa. The deal will also have little to no impact on the negotiations with Reliance Telecoms."

India's second-largest telecoms group Reliance Telecoms is looking at entering into some type of business partnership with the pan-African mobile operator.