Telkom should buy Cell C to boost scale and extract potential synergies.<\/p>\n
This is according to a Standard Bank Group Securities presentation from February 2019, which MyBroadband has seen.<\/p>\n
The presentation stated that Blue Label Telecoms – a large shareholder in Cell C – had a market cap of R4.2 billion after paying R5.5 billion for its stake in the mobile operator. This means Telkom could acquire Cell C at a reasonable price.<\/p>\n
At the time of writing, Blue Label’s market cap was around R3.5 billion – following its share price taking a hammering<\/strong><\/a> over the past year due to negative sentiment around its investment in Cell C.<\/p>\n Standard Bank’s presentation added that the return on investment for companies in the local economy was inadequate to sustain four mobile operators, unless South Africa’s GDP accelerates.<\/p>\n It added that Telkom Mobile was not building scale quickly enough either to “generate adequate returns”.<\/p>\n The pressure on mobile networks to drop data and voice prices in South Africa is another concern for operators.<\/p>\n “Cell C\u2019s operating and financial risk is rising as MNOs (mobile network operators) reduce voice and data pricing, without accelerating GDP growth,” states the presentation.<\/p>\n It added that Telkom is also uniquely positioned to create shareholder value given the expected increase in customer scale and on-net calling volumes.<\/p>\n There would be further efficiency gains when it comes to handset procurement and a reduction in Cell C’s reliance on tower leasing.<\/p>\n A reduction of “duplicate marketing, administration, managerial, and billing infrastructure” would be an additional benefit of the acquisition, along with the usage of complementary spectrum allocations.<\/p>\n This could amount to the following savings:<\/p>\n On the subject of spectrum, the presentation predicted that if Telkom acquired Cell C, ICASA would approve the deal – but insist that Cell C give back its 1,800MHz spectrum.<\/p>\n This is because the combined entity would have twice the 1,800MHz spectrum currently allocated to Vodacom and MTN, while Telkom would benefit from Cell C\u2019s 900MHz spectrum – as it does not have its own.<\/p>\n Approval from the Competition Commision was also predicted, as the two networks’ combined market share would still be below that of Vodacom and MTN.<\/p>\n The Standard Bank presentation stated that a 100% acquisition of Cell C by Telkom would cost R12.2 billion – with an enterprise value of R20.9 billion.<\/p>\n Telkom would also assume Cell C’s interest-bearing debt, and would cease to pay a dividend to “commence debt repayments”.<\/p>\n This is not the first time Telkom buying Cell C has been suggested, and as recently as December 2018 industry insiders were talking about a potential deal.<\/strong><\/a><\/p>\n Following this, it was reported at the end of February 2019 that Blue Label was looking for new investors in Cell C.<\/strong><\/a><\/p>\n Telkom should buy Cell C to boost scale and extract potential synergies.<\/p>\n","protected":false},"author":340966,"featured_media":253043,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_threads_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[3],"tags":[355,35,109],"class_list":["post-298504","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-telecoms","tag-cell-c","tag-headline","tag-telkom"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/298504"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/340966"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=298504"}],"version-history":[{"count":0,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/298504\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/253043"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=298504"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=298504"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=298504"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Price drops<\/h3>\n
\n
Spectrum<\/h3>\n
The price<\/h3>\n
Now read: MTN South Africa \u2013 Big subscriber and data growth<\/a><\/h3>\n","protected":false},"excerpt":{"rendered":"