MTN South Africa and Telkom have held discussions regarding a possible merger, according to a report in the Sunday Times.

The report follows big setbacks at both MTN and Telkom in recent weeks.

The Central Bank of Nigeria has demanded that MTN return $8.2 billion which it says MTN illegally moved out of the country.

Soon after this, the Attorney General of Nigeria made its own demands of the mobile operator, stating that it owed $2 billion in back taxes on foreign imports into the country.

This resulted in MTN’s share-price hitting multi-year lows.

At home, Telkom is in the process of offering staff voluntary retrenchment packages.

Telkom said the retrenchments can be attributed to the fact that it has subsidised the South African mobile industry by about R70 billion through asymmetric call termination rates.

Telkom has also seen multiple top executives leave the business in recent months.

Merger

The report added that MTN is also reviewing its operating footprint across Africa and abroad, due to regulatory burdens in many countries.

With MTN and Telkom taking strain, it is no surprise that merger talks are rumoured.

Wayne McCurrie from FNB Wealth and Investments recently stated that the two smallest mobile players – Cell C and Telkom Mobile – face tremendous challenges and will not survive unless they merge. A move to merge with MTN SA may therefore help Telkom’s mobile business.

Telkom and MTN also boast large fibre assets locally: Telkom through its Openserve division and MTN with its Supersonic fibre business.

The report noted, however, that a potential deal would need to be approved by the competition authorities and regulatory bodies – which may prove a big hurdle.