TechFinancials.co.za had a number of readers ask about how Telkom will finance the possible acquisition of Cell C. Telkom informed investors on Monday that it was conducting a due diligence to buy Cell C. By Gugu Lourie
Bloomberg sources are saying Oger Telecom has put a R20 billion price tag on Cell C.
The question whether Telkom could really afford that price tag of Cell C lies in an article written by TechFinancials.co.za on 4 October 2015 titled: Cell C could be a great buy for Telkom.
In the article, TechFinancials.co.za argued that the answers is yes.
Telkom may opt to initiate a rights issue to raise cash to fund the deal, but this may be unpopular with certain investors, who may not want to dilute their shares.
However, Telkom may perhaps also decide to go for a simple route: share placing, which would mean approaching its top institutional investors to take up the rights issue to buy Cell C.
But the rights issue is likely to dilute South African Governments shareholding and the question is whether the state will be prepared to accept that.
The shareholders of Telkom include the South African Government, Public Investment Corporation, Old Mutual, Allan Gray, Investment Solutions and retail investors. The Government owns a majority stake in Telkom.