Telkom could make an­other bid for Cell C

The Witness - - YOURMONEY -

TELKOM SA is con­sid­er­ing mak­ing an of­fer to buy a ma­jor­ity stake in Cell C that would lead to a com­bi­na­tion of South Africa’s third and fourth largest mo­bile phone com­pa­nies, ac­cord­ing to peo­ple fa­mil­iar with the mat­ter.

The former land­line monopoly is seek­ing man­age­ment con­trol of the Jo­han­nes­burg-based car­rier, said the peo­ple, who asked not to be named as the plans are pri­vate. Pre­to­ri­abased Telkom hasn’t made a fi­nal de­ci­sion and the deal could yet fall through, they said.

Telkom and Cell C de­clined to com­ment.

Shares in Blue La­bel Tele­coms, which owns 45% of Cell C, gained as much as 8,7%, the most since July 20, and traded 4,2% higher at R5,75 as of 11.09 am in Jo­han­nes­burg. Telkom fell 4,3%.

A tie-up be­tween Cell C and Telkom’s mo­bile phone di­vi­sions would cre­ate a busi­ness with about 21,5 mil­lion sub­scribers.

That would pose a slightly greater threat to the dom­i­nance of South Africa’s top two oper­a­tors, Vo­da­com Group and MTN Group, which have more than 70 mil­lion cus­tomers be­tween them.

Telkom has been in­vest­ing heav­ily in mo­bile and data ser­vices to off­set the de­cline in land­line use, and is al­most 41% owned by the gov­ern­ment.

Telkom ini­tially at­tempted to take over Cell C last year, only to be re­jected in fa­vor of a re­cap­i­tal­i­sa­tion plan led by Blue La­bel.

That deal re­duced Cell C’s debt by two-thirds to less than R6 bil­lion, and the firm last month re­fi­nanced R1,4 bil­lion of bor­row­ings on bet­ter terms.

Even so, Blue La­bel’s shares have slumped 62% this year, partly on con­cerns about the cost of pro­vid­ing Cell C with ad­di­tional cash and loans. Telkom’s stock has gained 20%, valu­ing the com­pany at R29 bil­lion.

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