Cell C rejects Telkom’s takeover offer

SA’s third-largest mobile operator Cell C has rejected a takeover offer from Telkom.

The offer was rejected by Cell C’s board of directors, Telkom said on Friday, adding that it continued to believe the offer was “a compelling proposition that would have created significant value for all stakeholders including Telkom’s shareholders.”

Telkom had confirmed market speculation about the potential acquisition earlier in November, with the group focusing heavily on mobile operations.

Telkom, which grew its own  subscriber base by 85% in the past financial year to 9.7-million, has been working to transform its business away from fixed-line provision to a data services player.

It had increased its subscribers to 11.5-million by the end of September. 

If successful, the combination of Cell C and Telkom would have created a strong competitor to Vodacom and MTN. Of the 95-million active SIM cards in SA, MTN and Vodacom have 70-million.

This is not the first time that the 40% government-owned Telkom had made a bid to buy Cell C. It 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. 

In morning trade on Friday Telkom jumped 4.65% to R47.23.

The positive reaction to the rejection of the offer may have been expected as the market had previously been concerned that Telkom may not have had the balance sheet capacity to take on the Cell C acquisition, said Lester Davids, trading desk analyst at Unum Capital.

Blue Label Telecoms was up 2.56% to R3.27.

gernetzkyk@businesslive.co.za