Telkom CEO Sipho Maseko. Picture: MARTIN RHODES
Telkom CEO Sipho Maseko. Picture: MARTIN RHODES

Telkom is considering making an offer to buy a majority stake in Cell C that would lead to a combination of SA’s third and fourth-largest mobile phone companies, according to people familiar with the matter.

The former landline monopoly is seeking management control of the Johannesburg-based carrier, said the people who asked not to be named as the plans are private. Telkom hasn’t made a final decision and the deal could yet fall through, they said.

Telkom and Cell C declined to comment.

A tie-up between Cell C and Telkom’s mobile phone division would create a business with about 21.5-million subscribers. That would pose a slightly greater threat to the dominance of SA’s top two operators, Vodacom Group and MTN Group, which have more than 70-million customers between them.

Telkom, which has been investing heavily in mobile and data services to offset the decline in landline use, is almost 41% owned by the government.

Telkom initially attempted to take over Cell C in 2017, only to be rejected in favour of a recapitalisation plan led by Blue Label. That deal reduced Cell C’s debt by two-thirds to less than R6bn  ($437m), and the firm refinanced R1.4bn in borrowings on better terms in November.

Even so, Blue Label’s shares have slumped 62% in 2018, partly on concerns about the cost of providing Cell C with additional cash and loans. Telkom’s stock has gained 20%, valuing the company at R29bn.