Telkom Cell C tie up?

WITH Vodacom’s listing and Telkom losing its cellphone arm, the telecoms market in SA is set for a shake-up. The latest speculation is that Cell C might be tempted to join forces with Telkom. The idea is appealing, but raises the question of whether a landline-based company must have a cellphone partner to survive.

If this is true, then the situation is rather bizarre. It means the prospects for a landline-based company are so bad that its real function is to morph into something that it is not. But if that is the case, why not dump the landline business entirely and become a cellphone company immediately?

Oddly, this is exactly what is happening. Telkom is moving as fast as it can to a largely airborne- based system to achieve savings and because copper wire theft is so endemic in SA. The cellphone companies, on the other hand, are laying cables as fast as they can and participating in consortia to bring alternative global connection links to our system in order to increase their data offerings.

It’s a good example of real convergence, which is why the terminology of “cellphone” company and “landline” company are becoming more and more interchangeable. It’s also significant that regulatory systems are lagging developments on the ground.

If you put all these factors into a bag and shake them, you would have to say a Telkom-Cell C link is conceptually desirable. From an industrial logic point of view, it gives Telkom a cellphone string to its bow, and would give Cell C a competitive boost. It could also short-circuit the regulatory lag.

The question remains whether this industrial logic can be translated into agreeable financial terms.

Telkom – Cell C tie up:  give your views

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Telkom Cell C tie up?