Cell C and Telkom to join forces?

As a Telkom shareholder, I'd sleep beter knowin Hedberg is running the show ratha than Rueben and his gang.

With that said, I don't think Cell C is a good buy 4 Telkom. All Cell C brings to the table is its infrastructure. At operational level, I'm not convinced.

Telkom needs management and partners that can integrate Telkom into the real telecoms market where it will have to be very smart to crack the African pie.
 
Who said you cant buy Cell c and zain lol? 10bil is alot of money! In terms of Cell C telkom needs the coverage not only if it ever thinks of taking Neotel down (thats the main reason for telkom mobi after all) but to get into da market as quick as possible...2010 is next year after all...Zain could be good investment at the customer level because it would open South Africa to its One NeTWOrk and telkom mobi/cell c to the world.
 
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Im actually glad Telkom are venturing into mobile. I have been with vodacom and Im now with MTN.....and Im ready to port. Out of all these 3 services, strangely, Telkom has been more reliable and I can actually get through to a service centre. I cant say the same for MTN.....7 days dialing 808 for well over an hour and a half (till automatic cut off), fraudulant billing...my list goes on.
 
Wouldn't it be a conflict of interests since they already have shares with Vodacom?
 
Of all the possible Telkom scenarios, this one has a high probability currently, but that doesn't mean it's the best.

On the face of it, bringing in an experienced CEO to drive a major acquisition and turn a company around sounds great. There is a lot of upside, but one has also to consider the downside. Here are some obvious flaws:

  • Despite what institutional shareholders (and governments in particular) seem to think, running a company does require a real understanding of what it does. It's not just about "leadership" (at least not what they think leadership is). It's not at all clear that a Mobile Operator CEO is the right person for Telkom.
  • Fixed and mobile operators are very different types of company - successful mergers are extremely rare. Mobile operators suffer from a "mobile mentality", which makes them either arrogant or blind to the mundane task of delivering quality fixed line services. They tend to think of everything from fibre access to the global Internet as "backhaul". Just ask MTN NS.
  • Cell C is not healthy (not just its debt, but its market position in the long term). Telkom is even less healthy, unless it radically changes its business. It's not really clear how merging them will make the whole healthier, unless they do all the things they would have had to do anyway. All that a merger will do is make the process much more difficult.
  • Unless the two companies move very rapidly to remove overlap, they will basically cannibalise each other. In the broadband and mobile broadband space, there's not much overlap (Cell C doesn't have any, basically), but the bulk of Cell C's services compete directly with Telkom's (still relatively large) fixed line residential telephone base. The temptation will be to run the fixed line telephone service down, since the mobile per unit cost is so much lower.
  • In terms of financial engineering, which is so fashionable (or was until recently), it seems sensible to cancel Cell C's debt with Telkom's cash pile, but it's not clear that it's better for investors than keeping them separate. One would have to do the sums. The merged company would still have limited upside unless it did something radical. At least Telkom currently has money to burn to create future returns.
  • Ultimately, companies consist of people, and success depends on the ability of those people, the corporate culture, and their drive for success. Just using those words when talking about a combined Telkom and Cell C seems wrong. Some things are just too broken to fix with simple corporate shuffling. A Mobile / Cell C CEO will suffer a lot of resentment from day one.
  • A merged company would still have government and the government pension fund as sizeable shareholders, with influence over the Board. It's really not clear how any CEO, no matter how good, would get around this. I suspect that what Telkom really needs is a different Board, and not just a different CEO.
So, Jeffrey, if you read this, you may want to think hard before you follow in the footsteps of Sizwe, Papi and Reuben. It probably won't be great for your legacy. Have your shareholders thought about selling to Tata/Neotel instead?
 
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I have not seriously considered the possibility of a Neotel - Cell C partnership, but if Tata is willing to inject another few Billion Rand into South Africa it does make as much sense as a Telkom – Cell C merger. Does Neotel however have the capacity to ‘gobble up’ an operator like Cell C? Telkom is a significantly larger operator than Neotel (at this stage) and Cell C can simply become its mobile arm. Does Neotel have the same capacity?
 
This is good, Telkom is already providing 3G services in some parts of the country, If I'm correct, I think Telkom has aggressively competitive 3G packages and Cell C has insanely aggressive call pricing structure. Any marriage between the two will be a very good marriage.
 
Personally, I can't see what value CellC would represent to Telkom. CellC's only assets are ...

1. Aging GSM/EDGE network. Telkom are in the process of rolling out a state-of- the-art HSPA network. They have the manpower & cash to match & exceed CellC's converage in he not too distant future.

2. Customer base. Largely made of low LSM (& ARPU) customers, offering a converged provider little scope for cross selling of other products.
 
Serqet said:
Wouldn't it be a conflict of interests since they already have shares with Vodacom?
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No, they are selling their stake in Vodacom or it has been sold already. Vodacom is listing on the JSE as a seperate entity without any shareholding from telkom.
 
No prizes for guessing who the biaatch is gonna be in this relationship :D


That said, after vodacom/vodaphone, it does make perfect business sense and Cell C customers will certainly benefit.
 
Roman4604 said:
Personally, I can't see what value CellC would represent to Telkom. CellC's only assets are ...

1. Aging GSM/EDGE network. Telkom are in the process of rolling out a state-of- the-art HSPA network. They have the manpower & cash to match & exceed CellC's converage in he not too distant future.
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Never comment on stuff you know nothing about,untill recently cellc's infrastructure was the best in SA hence the upgrades by both MTN and Vodacom. Think about it Cellc is 7 years old as opposed to lets say 15 for the other two?

Mostg of Cellc towers can do hsdpa and will be switched on by the end of the year as soon as they get the license...

Great news for all of us right? MTN and vodacom is sucking SA dry with high tarriffs.

btw rolling out a network will cost billions dude...almost 1.4 mil per tower...hehe good luck

why do you think cellc's got the debt that they've got?
 
Isn't this illegal somehow? I mean why sell it's shares in one mobile operator that makes significantly more profit and now buying another one that makes less profit?
 
Well if you can own 100% of a nerwork and rebrand it, also the newer network. Vodacom already had 3G, And there is no way they were goning to let telkom use it. Well if Cell C gets purchased by Telkom then cell C will get the best backhauling to Base stations and they will pay nothing for them....

That means the best Quality & Speeds Call rates might come down form cell c to cell c and telkom to cell c and the other way around. Just a thought:o

I think VC & MTN might feel a pinch with a merge like this
 
drukkie said:
Mostg of Cellc towers can do hsdpa and will be switched on by the end of the year as soon as they get the license...
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Rubbish, where did you pull this from? Show me one shred of evidence indicating CellC have invested in/deployed a UMTS RAN (Radio Access Network). You do understand this is a prerequisite for offering HS(X)PA services?

Also pray tell, which exact license is CellC waiting for?

drukkie said:
btw rolling out a network will cost billions dude...almost 1.4 mil per tower...hehe good luck
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Luck has nothing to do with it. Telkom have already commited ~R2 billion to their HSPA network and with R 22.5 billion they'll get from the sale of the additional 15% stake in VC, its not like they'll be hard up to invest more.

drukkie said:
Never comment on stuff you know nothing about
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You should heed your own advice.
 
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