MTN Group Ltd recently made a takeover approach for Telkom SA SOC in a deal that would have combined SA’s second and third largest telecommunications operators, according to sources familiar with the matter.

Telkom has so far shown no interest in a sale, said the sources, who asked to remain anonymous as the talks are confidential. It remains unclear whether the larger rival will continue its pursuit, they said.

“There is no deal on the table in relation to this matter,” MTN said after Bloomberg’s inquiries, declining further comment.

A representative for Telkom didn’t immediately comment.

Following a multi-year asset disposal programme, MTN is flush with cash and looking to build on its core business. A combination with Telkom would help close the gap with rival Vodacom Group Ltd, SA’s market leader. 

Telkom shares jumped 6.8% in early trade in Johannesburg on Monday to a two-year high. That values the Pretoria-based company at R30bn.

MTN shares gained 1.9%, extending a surge for the year to more than 183%.   

Last week, the two parties agreed to a multi-year roaming agreement in which Telkom uses MTN’s network. There are also some alignments in their corporate strategy as MTN is busy with a sale and leaseback deal of its SA towers, and Telkom is separating its towers business to prepare for a possible listing of the unit.  

With more than 40% owned by the state, Telkom controls SA’s largest landline network and sells mobile phone packages and other services.

Telkom’s other large shareholder is state-owned pension fund manager the Public Investment Corporation, which holds 14% of the company, according to Bloomberg data.

For a deal to get the go-ahead, there would have to be government support and competition issues would have to be worked on, said the sources. 

Johannesburg-based MTN has been paying debt at a rapid rate as it disposes of non-core assets. That includes the phased sell down of a stake it holds in recently listed IHS Towers, the sale and lease back of its SA towers and leaving some Middle East operations. 

MTN is Africa’s biggest mobile phone company with about 272-million subscribers, according to its website.

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