David Shapiro, deputy chairman at Sasfin Securities, said Cell C faces a big challenge in trying to keep up with multi-billion-rand network investments by other operators.
The deal will provide Cell C with much-needed cash to reduce its debt levels – R5.5 billion from Blue Label and R2 billion from Net1.
However, Shapiro said it will take far more cash than that to ensure Cell C can compete effectively against Vodacom and MTN.
Shapiro pointed to MTN, which invested R11 billion in its network over the past financial year. This is much more than what Cell C has at its disposal.
“If you want to stay competitive, you have to spend a lot of money to do that. More and more competition is coming into the market,” said Shapiro.
“The other thing is voice is falling. Data use is increasing, but at much cheaper rates.”
Shapiro questioned whether Blue Label Telecoms and Net1 have resources to fund the capex needed to remain competitive in the local telecommunications market.
Blue Label Telecoms CEO Mark Levy is more upbeat, saying they will start reaping the rewards of their investment in Cell C from day one.
“Cell C is really doing well in the market, and is capturing market share,” said Levy.
He said the company will provide Blue Label with additional revenue as soon as the deal is done.