It appears that a long discussed tie-up between South Africa’s number three and four mobile operators could finally become a reality, with Telkom now carrying out due diligence on Cell C in a bid to beef up its mobile presence, and meet ambitious national broadband roll-out targets.
South African fixed-line incumbent Telkom (JSE:TKG) is “performing due diligence” on number three mobile operator Cell C, the company said in a stock exchange filing today.
In late October, Bloomberg reported that Cell C’s Dubai-based parent Oger Telecom had rejected a R14bn (US$1bn) offer by the state-owned telco for its 75% stake. Oger has reportedly requested that a new offer be ready by late November.
Telkom had first stated that the two were in talks in late September, while Cell C went on the block in March, with its owner mandating Goldman Sachs and Houlihan Lokey. Telkom is advised by Standard Bank.
When the two started talks, Telkom reportedly indicated that it was willing to pay a maximum of R18bn (US$1.29bn), while Oger was seeking R22bn (US$1.58bn).
In October, Telkom announced a functional separation of its network division, Openserve, saying that this open access approach would help the country meet the broadband connection targets set in 2013.
However, it has been suggested that Telkom will struggle to meet these objectives if it remains the distant number four mobile operator, which may explain its interest in Cell C.
But the operator is also looking to satellite as a means to achieve coverage, having announced a partnership with Avanti Communications (LSE:AVN) earlier this month.
Telkom has said it has 2.2 million mobile subscribers, while Cell C had a reported 18 million by the end of 2014. South Africa has a population of 53 million.
Telkom’s talks with MTN over a proposed network sharing agreement fell foul of competition body CompCom this summer, while a previous merger attempt between the two also failed.
