Cell C/8ta consolidation on the cards for 2013?
Research and advisory firm International Data Corporation (IDC) believes that 2013 could see a mega deal between South African mobile operators, Cell C and Telkom’s mobile unit 8ta.
This potential merger form part of the IDC’s top 10 predictions for the African telecommunications market in 2013.
The advisory group predicts that, in 2013, Africa’s first major consolidation transaction will occur and will likely be in South Africa.
It believes such a deal may be similar to the consolidation of Orange and T-Mobile in the United Kingdom to form a new entity called Everything Everywhere, which is currently the largest mobile operator in that country.
The IDC notes that since 2011, the South African mobile market has reached penetration rates of over 100%, and subscriber acquisition has become expensive and all the more difficult.
MTN/Vodacom dominance
Furthermore, the South African mobile market is dominated by two operators, MTN and Vodacom. These two companies control over 70% of the subscriber market share.
This puts Cell C and 8ta, a subsidiary of the incumbent operator Telkom, and the most recent entrant into the mobile market, in a difficult position, with the latter struggling to gain subscribers.
Following issues with its parent company, the IDC points out that 8ta have struggled to raise the much-needed capital to expand its network and compete effectively.
“Cell C, the third-largest mobile operator, has spent stupendous amounts of money on marketing and promotional activities to try and position itself in line with the larger operators, MTN and Vodacom,” the IDC said.
However, it stressed that Cell C’s initiatives have yielded minimal results in terms of market share.
“Furthermore, the company has spent a large amount of money on expanding its network, again yielding dismal results in terms of subscriber acquisition and, consequently, revenue growth.”
Consolidation
The IDC believes that these companies are in the right position to consolidate their operations. By consolidating doing so, 8ta would stand to gain more customers through Cell C’s existing base and would be able to expand its network through Cell C’s infrastructure.
Cell C, on the other hand, would be able to leverage 8ta’s access to the incumbent’s vast backhaul and backbone infrastructure, as well as gain customers through 8ta’s existing base.
The advisory firm believes both companies are in dire need of operational efficiencies such as cost and capital optimization, and consolidating their operations would enable each company to achieve this.
Domino effect
The IDC believes that such a consolidation in South Africa would set off an avalanche of similar activity in other African markets. The region is full of operators in a similar position, it argues.
“Furthermore, operators in Africa have taken a wait-and see approach to consolidation, and the predicted merger between 8.ta and Cell C is expected to set a much-needed reference point for the rest of the region.
IDC’s top 10 predictions for the African telecommunications market in 2013 are:
- As African operators intensify their efforts to monetize 3G and other data networks, 2013 will be “the year of the app and smartphone.”
- Long Term Evolution (LTE) will gain momentum as a mainstream commercial offering in 2013.
- Consolidation-driven merger and acquisition activity will dominate.
- Africa’s first “Everything Everywhere” is on the horizon.
- Satellite connectivity will remain a force to be reckoned with.
- Rural connectivity will become an emerging reality.
- WiFi will emerge as a viable complementary offering to 3G and LTE.
- The enterprise sector (all enterprises) will become more delineated, with providers increasingly focused on the small and medium-sized enterprise (SME) segment.
- A new breed of mobile virtual network operator (MVNO) will emerge from the retail and finance verticals in South Africa.
- Enterprise mobility services providers’ and vendors’ solutions will improve in 2013, thus boosting uptake.
More on the IDC
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Saudi Telecom takes big hit on Cell C spend
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