Speaking during a conference call announcing Telkom’s interim results for the six months ended September 2012, Moholi said that there may be merits in a deal between Telkom Mobile and Cell C, but that there is not a formal transaction on the table.
“At this time there is no formal transaction on the table… it is nothing that the board is listening to at this time,” the outgoing chief executive said.
Telkom CFO Jacques Schindehütte said that he is not too optimistic that a merger between Telkom and Cell C will significantly benefit Telkom.
Schindehütte explained that Cell C can benefit Telkom through brining more and lower frequency spectrum for network deployment, bringing a national mobile network to Telkom and offer additional management expertise.
He added that SA’s third operator could possibly offer a shorter period for Telkom Mobile to break even; however, the Telkom CFO said that the benefits which Cell C could bring to them are not enough to stop Telkom’s challenges.
Schindehütte said that co-operation between the two companies, rather than a merger, would currently make more sense.
Cell C CEO Alan Knott-Craig told BusinessTech in October that market consolidation is inevitable. “Margins are thinning and smaller operators’ ability to compete is being hampered by lack of scale,” he said.
“Consolidation will help smaller operators compete more effectively with larger players and it is only then that customers will benefit from tariff reductions, network availability and quality of service.”
“In my view, there will be some form of consolidation or partnership in the industry in the near future. However, any decisions on consolidation or future partnerships involving Cell C would be for our shareholders to decide upon,” Knott-Craig said.
Business Day also reported in October that two high-level meetings between senior executives from Telkom and Cell C are said to have taken place earlier this year, and “the two parties are now said to be working on the finer details of a potential merger”.