Cell C hints at Telkom Mobile merger

Acting Cell C CEO, Jose Dos Santos has hinted at a possible consolidation between two of South Africa’s newest mobile entrants.

Last week, Sipho Maseko, Group CEO at Telkom, admitted that the Telkom Mobile business is going through “a very difficult time”, and is in discussions with parties over future operations.

Asked by BusinesTech whether Cell C is currently in discussions with Telkom Mobile over a merger, Dos Santos, Cell C chief commercial officer, and Acting CEO said: “Market consolidation is inevitable. Consolidation will help smaller operators build scale to compete more effectively with players that have significant market power.”

“There is likely to be some form of consolidation or partnership in the industry. However, any decisions on consolidation or future partnerships involving Cell C would be for our shareholders to decide upon.”

In July, Cell C CEO Alan Knott-Craig confirmed that the mobile operator had addressed talks of consolidation with Telkom Mobile.

Knott-Craig suffered a minor stroke on Monday, 18 November 2013, and according to the mobile firm, was recovering in hospital. “With regards to Alan, he is progressing well,” Dos Santos said.

Jose dos Santos
Jose dos Santos

Telkom Mobile plans

Speaking at Telkom’s results announcement in Pretoria last week, Maseko said he would continue to be “opaque” around plans the group has for its mobile arm and derisking.

“We are in conversation with parties around this on some possible options – and without saying much around it, in respect to parties we are in dialogue with around this.”

“At the right time we will announce who the parties are and what exactly we will be doing, but the team is in the middle of very sensitive conversations,” Maseko said.

“I look around here and I see some of my bankers giving me a very nasty look. I’m afraid I won’t say much more than that.”

“The capital appetite will effectively be less, and hopefully it will cost us less going forward. That is how we are thinking about fixing the mobile issue,” the CEO said.

“We will be an integrated player, we will have all offerings around telco – so fixed and mobile – but we will do it in such a way that is capital efficient. That’s what we are trying to do right now,” Maseko said.

Two is better than one

Under the leadership of Knott-Craig, Cell C’s subscriber base has grown 33% to 12.3 million customers in just 18 months to September 2013.

In July 2013, Cell C revealed that it had 11.7 million subscribers on its network – a steady climb from 8.2 million users in 2011 and 9.4 million in 2012 – boosting its relative market share to over 17%.

Knott-Craig has said that the company is targeting 25% market share in order to be profitable.

Subscriber growth has, however, come at a cost, namely a deterioration in the quality of its network – a problem which Telkom could solve with its infrastructure.

Telkom, meanwhile, would welcome Cell C’s subscriber base with its current total at a paltry 1.6 million.

More on Telkom and Cell C

Telkom in talks over mobile arm

Telkom and MTN in talks: report

Telkom dismisses Cell C merger talks

Cell C CEO Alan Knott-Craig suffers stroke

Is there space for Cell C and Telkom Mobile?

Cell C admits network “taking strain”

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Cell C hints at Telkom Mobile merger