Price tag issues delay sale of Cell C to Telkom

The sale of Cell C, has seen some telcos drop out of the bidding race, because the country’s third mobile phone operator’s Dubai-based parent company, Oger Telecom, has placed a price tag that seems “too high”. Sources close to the possible transaction on Wednesday said Telkom was the only serious bidder left in the race. By Gugu Lourie

Last month, Oger Telecom’s chief legal officer and Deputy CEO Mazen Abou Chakra revealed to Business Day that six groups had approached the Dubai-based firm with interest in acquiring their stake in Cell C.

Sipho Maseko, Telkom chief executive
Sipho Maseko, Telkom chief executive, who might end up buying Cell C to bulk up its mobile phone unit

At the time Chakra said: “No decision has been taken. We are very happy with the good performance of Cell C over the past 12 to 18 months and we remain fully committed to the business until a decision to sell our stake is taken.”

There is no timeline set by Oger Telecom to sell its shareholding in Cell C.

“Telkom is more than keen to bring Cell C into its fold after buying tech firm Business Connexion (BCX).  The deal with Cell C was likely to be announced next month, but the delay is that Cell C is not budging on an offer being put on the table by Telkom,” a source closer to the talks said.

Telkom paid R2.7 billion to buy BCX.

“Telkom has proposed a price consideration to acquire Cell C that is being viewed as being too low by Oger Telecom, given the fact that the mobile phone operator is operationally profitable,” said another source.

Telkom spokesperson Jacqui O’Sullivan said in an email response to queries that there was clearly much speculation in the market since Cell C made it known that it is looking for a buyer.

“At the right price, Telkom would certainly consider Cell C, as it would any other synergistic partnerships either locally or internationally,” said O’Sullivan.

“Telkom’s focused de-risking of the mobile business has delivered important improvements and the business is significantly more stable than it was 18 months ago.”

She added that the Telkom turnaround strategy was focused on cost containment and structuring the business for a sustainable future.

“Telkom’s growth will be predicated on both organic and inorganic growth so acquisitions, such as the recently acquired Business Connexion, certainly remain an option. While much improved, our mobile business remains small and to achieve scalability an option such as Cell C could be part of the approach,” said O’Sullivan.

Part of the problem is that Cell C is mired in long term billion rand debt. Telkom views the debt as a reason not to haggle over the price.

“It’s not easy negotiations,” said another source privy to the goings on around the possible deal.”

“Oger Telecom believes Cell C is a good asset after it has managed to grow its subscribers to more than 20 million in a difficult market and has build-up a profitable mobile virtual network operator platform.

“Oger Telecom is buying time to see if Telkom will budge before they start talks with a potential foreign buyer,” added the source.

The Dubai-based Oger Telecom, which indirectly owns a significant stake in Cell C, has reportedly reduced its investment in the mobile operator by a whopping R1.2 billion.

Cell C CEO Jose Dos Santos
Jose Dos Santos, Cell C CEO, who has made Cell C to be more attractive to potential suitors like Telkom

On Wednesday at a media briefing to announce LTE rollout, Cell C’s CEO Jose dos Santos said the mobile operator was no longer the company that people perceived it to be three years ago.

He said the telco was operationally profitable and in a very healthy situation.

Asked about an update on talks by its parent company Oger Telecom to sell its stake in the business, Dos Santos said there are reports that have cited Telkom as being interested in buying Cell C.

“There is a lot of interesting things in my life. If Telkom want us, they must write out a cheque.”

He wouldn’t be drawn into commenting about talks by Oger Telecom to sell its interest in Cell C.

“Cell C is an interesting proposition. I’d like to do something with them,” Telkom CEO Sipho Maseko told Reuters last month in an interview. “At the right price, I’m a buyer.”


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