One reason why Telkom buying Cell C is a win for you
Telkom buying Cell C would give government a significant presence in the mobile market, which could be leveraged to increase connectivity to all citizens, according to analysts Frost & Sullivan.
Bloomberg reported that Telkom is again considering a bid of $1 billion (around R13 billion) for Cell C, citing three people familiar with the matter.
In November 2015, Telkom announced it was in discussions with Cell C to acquire all shares in the company, following reports that the group had offered as much as R14 billion for Cell C.
Oger Telecom, which is Cell C’s major shareholder, rejected the offer from Telkom shortly thereafter, with the Dubai-based firm believed to have been seeking R22 billion.
Telkom then announced that it had terminated talks.
Naila Govan-Vassen, a senior analyst at Frost & Sullivan Africa said that Telkom’s potential acquisition of Cell C has been a part of their strategy since 2015.
“During that year, a proposed merger between the two entities got cancelled as a result of differences regarding the assessment of the value of the transaction.
“This transaction would give Telkom the opportunity to expand their footprint in the mobile market, adding to their Telkom Mobile unit.”
Govan-Vassen said a merger would push the combined unit’s share of the subscriber market to around 30%, and offer competitive mobile services to enterprises and consumers.
“Offering services beyond fixed line services would lay the foundation for Telkom to provide quad-play services in the long-term, which many of the global players are already exploring,” the analyst said.
F&S said that Telkom’s sstrategy somewhat mirrors what British Telecom – who dominated the fixed line market – have done in the UK with its acquisition of Everything Everywhere.
“The move would see Telkom better-placed to compete against Vodacom and MTN in the consumer space,” it said.
Anesu Charamba, ICT team leader at Frost & Sullivan Africa, said: “Being a part state owned enterprise (SOE), this will ensure that government gains a significant presence in the mobile market, which could be leveraged to increase connectivity to all citizens, especially in rural areas.”
F&S said that communications watchdog, Icasa, may not have a problem approving this deal, as this will ensure that all three operators are in the same level of competition in terms of subscriber base, capital and spectrum.
“On a related note, a similar strategy has been employed by traditionally B2B facing MNOs, such as BT, who acquired EE Limited in 2016, granting them the largest mobile subscriber base in the UK market. This acquisition could serve Telkom in a similar fashion in increasing their access to customer and consolidating their market position,” F&S said.
Renewed talk of a potential acquisition comes two weeks after Cell C had its corporate credit rating downgraded by S&P Global after missing an interest payment on senior secured bonds.
Cell C is currently in the process of restructuring its debt in an acquisition deal involving Blue Label Telecoms and other shareholders.
The operator revealed in October last year that it made a profit of R2.8 million in the six months ended June 2016, on revenues of just under R7 billion.
Cell C boasts more than 22 million subscribers, while Telkom reported a 42% increase in the number of active mobile subscribers on its network to over 3.2 million for the interim period ended September 2016.
Read: Telkom eyes Cell C purchase valued at R13 billion – report
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