Why Telkom SA’s Plans To Acquire Struggling Cell C Went Up In Flames

Talks of South Africa’s state-owned telecoms company, Telkom SA, acquiring fellow telecom competitor and 3rd biggest player in the market, Cell C, have been mooted for a while now.

But it appears those plans have hit a brick wall. Today, Telkom has revealed that its takeover bid for Cell C had been rejected — and it has something to do with Cell C expanding a roaming agreement with, MTN Group; the biggest telco on the continent.

Telkom has had its sights on becoming a mobile-focused business for some time now and it appears the acquisition of its larger albeit troubled competitor is integral to that plan.

There’s been acquisition offers from Telkom to Cell C in the past and the latest came earlier this month when Telkom made another approach as Cell C’s struggles with debt caused concerns over its survival.

“Telkom has received written notice from the Cell C board of directors rejecting its non-binding proposal,” Telkom, which is 40 percent owned by the state, said in a statement.”

“The Telkom Board continues to believe the offer is a compelling proposition that would have created significant value for all stakeholders including Telkom’s shareholders.”

Cell C, the nation’s No. 3 carrier, is majorly owned by Blue Label Telecoms, and there’s been no comment from the Blue Label Telecoms camp.

Cell C’s expansion of its agreement with MTN, which ultimately tanked Telkom’s latest takeover bid, will grant Cell C access to MTN’s network in some areas of the country, expanded nationwide.

While the debt struggles of Cell C are well-documented, it is noteworthy that things haven’t been exactly rosy Telkom either. The state-owned telco has also been grappling with its own debt problems after hefty investments to gear its operation towards newer technologies like mobile and fibre.

The mobile unit is now the star performer of its business, whereas customer numbers in previously big profit drivers like fixed-line are falling.

This year, Telkom saw its mobile unit grow its revenues by almost 57 percent in the six months to September 30.