Cell C says MTN offer to acquire Telkom should be treated with caution

Cell C CEO Douglas Craigie Stevenson says Telkom’s proposed acquisition of MTN requires scrutiny from regulators, reports the Sunday Times. reports.

MTN and Telkom announced on July 15 that the companies are in early discussions of a possible acquisition.

Neither the price nor the terms of the purchase have been announced, except that MTN seeks to purchase the entire issued share capital of Telkom in exchange for MTN shares or a combination of cash and shares.

According to Craigie Stevenson, regulators should take into account that the telecommunications market in South Africa has changed.

Whereas before you had mobile operators competing to deploy infrastructure, now the market is divided into two categories.

On the one hand, you still have infrastructure developers like MTN, Vodacom and Telkom. On the other hand, you have infrastructure buyers like Cell C.

According to Craigie Stevenson, regulators should carefully consider whether smaller operators like Cell C can continue to compete as buyers of infrastructure.

He said that industry regulator Icasa and the Competition Commission may consider several measures to encourage completion, such as introducing wholesale rules for infrastructure developers.

Cell C has been a staunch opponent of market consolidation in South Africa, except when Telkom made offers to buy it.

Telkom announced in March 2014 that it was negotiating a possible sale of the assets of its MTN radio network.

Cell C opposed the dealas well as The Competition Commission ended up blocking itstating that MTN will gain a significant advantage in the market.

He also believed the merger would solidify a market duopoly dominated by Vodacom and MTN.

All of South Africa’s mobile operators have vehemently opposed such large mergers in Competition Commission hearings.

Vodacom turned down an offer to buy Neotel after a similar rejection. Neotel was eventually sold to Liquid Telecom.

These fights have, in effect, made it impossible for South African mobile operators to acquire any other telecommunications provider that owns the much needed radio frequency spectrum.

Telkom has made several offers to buy Cell C, with speculation about a possible acquisition. since 2009.

In November 2015 Telcom announced he was in talks with Cell C to acquire all of the company’s shares.

However, companies stalled negotiations ten days later when they couldn’t agree on a price.

Bloomberg reported that Telkom was offering R14 billion at the time, while former Cell C owner Oger Telecom wanted R22 billion for a 75% stake.

In February 2017, Telkom was reportedly considering R13 billion offer on Cell C. As before, nothing came of the deal.

On November 12, 2019, Bloomberg reported again that Telkom was making attempts to acquire Cell C.

Telkom officially confirmed the talks on 19 November. Ten days later, Telkom announced Cell C turned down his offer.

Since then, Cell C has made progress in recapitalizing its R7.3 billion debt in the hope of company rescue.

Cell C’s priority is backed by creditors who account for about R2.95 billion of this debt. voted for the haircut by 80%.

Voting is mandatory for all bondholders.

The owner of Cell C Blue Label said the vote was a milestone and the final stages of the recapitalization deal are under way.

Blue Label said it expects the final closing of the deal at the end of July 2022.


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