Cell C’s massive problem it has no control over
On 9 November 2015 Telkom announced it was in discussions to buy Cell C, and that it was performing due diligence on the mobile operator.
Following the announcement, Telkom CEO Sipho Maseko said he always believed that there is “strong merit” in joining forces with Cell C, but that it will have to be at the right price.
Less than two weeks later, Telkom informed stakeholders it had terminated talks to acquire Cell C.
The reason was simple: price. Telkom said that “there is a difference between the parties on the assessment of value of the proposed transaction”.
While the potential selling price was not disclosed, industry speculation suggests that Telkom’s offer was around R16 billion.
Bloomberg reported that Cell C owners Oger Telecom value the mobile operator at R22 billion.
Oger Telecom told Business Times [pay-walled article here] that all options remain on the table for Cell C, and that it is in discussions with others suitors.
It added it was not a forced seller of Cell C, and it is happy with the performance of the operator.
Cell C’s big challenge: debt
The main challenge for Cell C is debt. In September, Cell C CEO Jose dos Santos said the company was operationally profitable, and that it was showing strong growth.
However, media reports stated that Cell C was struggling to manage its debt, which is reported to sit at R14 billion.
Since Cell C has to repay the debt in foreign currency, the weak rand has further increased Cell C’s burden.
The weak rand is something which Cell C has no control over, but has significantly weakened Cell C’s financial position.
Cell C was asked about the impact of the weak rand on its debt and its overall financial position, but the company would not comment on the matter.
Cell C would also not divulge any other details about its debt.
Oger Telecom also declined to discuss how much debt it had, in an interview with Business Times.
Rand versus US dollar
More on Cell C
Telkom-Cell C merger will bring strong competition to Vodacom and MTN
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