Vodacom Group is negotiating an SA wireless network-sharing deal with fixed-line operator Telkom as a replacement for former partner Cell C, say people familiar with the matter.

The unit of Vodafone Group lost about R1bn ($70.7m) of annual revenue when Cell C jumped ship to rival MTN Group earlier in 2018, said the people, who asked not to be identified as the talks are not public.

Bringing in Telkom, SA’s fourth-largest mobile-phone company, would make up some of the shortfall, they said.

Vodacom and Telkom declined to comment.

Vodacom and MTN are the country’s two largest mobile-phone carriers, and have about 43 million and 30 million customers, respectively.

That is more than the total population, meaning that some people have more than one wireless contract.

To squeeze extra revenue, both companies are seeking to add services or partnerships — taking advantage of demand for their 4G spectrum from smaller rivals.

For its part, Telkom, almost 40% owned by the government, is seeking ways to add scale and compete more effectively with its three larger rivals.

The majority of Telkom’s business is made up of fixed-line services.

Telecom stocks

Cell C has 16 million subscribers and Telkom 5.2 million.

Telecoms stocks were among the worst performers on the JSE on Wednesday.

MTN’s shares closed as much as 2.12% lower, Vodacom lost 2.03% and Telkom shed 1.45%. Blue Label Telecoms, which owns 45% of Cell C, was up 0.4%. Telkom is the only one among the companies to have gained ground so far in 2018.

Bloomberg and Staff Writer