Cell C and Telkom Mobile financially doomed: analyst
Cell C and Telkom Mobile will never get a decent return on their investment. This is according to Wayne McCurrie, portfolio manager at Momentum Wealth.
Speaking on CNBC Africa, McCurrie said that there is no way that Telkom Mobile or Cell C are generating positive cash flows. “They must be burning up hundreds of millions, if not billions of rands,” said McCurrie.
He said that the “glory growth days” of the cellular market are over. “They hit full saturation many years ago, and the two smaller players come into the market and they want to grab 10% or 15% or 20% market share – I do not think it is viable from a shareholder perspective,” he said.
McCurrie said that Cell C and Telkom Mobile is in a difficult position as it is very challenging to take on Vodacom and MTN in a mature and saturated market.
He said that the smaller players have no option other than to compete on price, because it is not possible to really offer something significantly different.
However, lower prices mean lower returns, which will make it nearly impossible for the newcomers to show a good return on investment.
Telkom CEO Sipho Maseko recently confirmed McCurrie’s view, saying that Telkom Mobile is not sustainable in its current format.
“On the mobile side we experienced continued financial losses, and a standalone path is not sustainable going forward,” Maseko told staff on 12 May 2014.
Telkom is currently negotiating a network sharing agreement with MTN, which will limit Telkom’s investment in its mobile network. Maseko hopes that this deal will make Telkom Mobile more sustainable.
More on mobile services
MTN, Telkom Mobile network sharing deal here soon: report
MTN, Telkom Mobile deal to boost 4G data
Loading ...