Telkom has confirmed that it is in discussions with Cell C to acquire the embattled mobile network.
“Telkom has substantially concluded its due diligence, however, discussions are at a preliminary stage,” said Telkom in a statement.
“The Potential Acquisition will be subject to Cell C completing a financial restructuring to ensure that its gearing levels are reduced to a sustainable level as specified by Telkom and commercial contractual relationships are renegotiated to terms acceptable to Telkom.”
Telkom added that the potential acquisition will be subject to a number of regulatory approvals.
This is the third time that Telkom has attempted to acquire Cell C, but previously Cell C chose to recapitalise with Blue Label Telecoms, which now has a 45% stake in Cell C, instead.
Telkom confirmed on Tuesday that it was in talks regarding a potential acquisition, but did not identify its target at the time.
Reports indicate that Telkom’s interest in acquiring Cell C includes a plan to reduce the network’s debt – which currently stands at R9 billion – and renegotiate contracts with suppliers.
If Telkom’s acquisition of Cell C were to be successful, it would mean that Telkom would have a business boasting about 22 million subscribers – which, while significantly lower than the approximately 70 million subscribers of MTN and Vodacom, would pose a greater threat to the dominant mobile networks.
MTN is currently engaged in negotiations with Cell C regarding an extended roaming agreement, the latter has confirmed, with talks in an “advanced stage.”
“Cell C remains focused on ensuring operational efficiencies, restructuring its balance sheet, implementing a revised network strategy and improving overall liquidity,” said Cell C.
“Cell C will look at any opportunity that will assist with the company’s long-term viability. Any opportunity will need to undergo a due-diligence process that takes into account all stakeholders.”
The Buffet Consortium is also reportedly interested in purchasing some of Cell C’s assets.
Cell C comment
Cell C confirmed that it has received a non-binding offer from Telkom.
“Independent financial and legal advisers have been appointed representing the lenders and constructive discussions on the recapitalisation are underway with them and other stakeholders in respect of various proposals,” said Cell C.
It also confirmed previous market communications that negotiations for an expanded roaming agreement are at an advanced stage.