South Africa’s Telkom mulls $1 billion bid for Cell C

Bloomberg

Telkom SA SOC Ltd. is considering a bid of as much as $1 billion for South African wireless operator Cell C Pty Ltd., which has missed debt payments and is trying to complete a recapitalization, according to three people familiar with matter.
Investment banks are also approaching other potential bidders with the firepower to take on the deal, said two of the people, who asked not to be identified as the matter is private. Blue Label Telecoms Ltd. agreed to buy a 45 percent stake in Cell C last year, but the deal has yet to be completed a week before the end-February deadline.
“The Cell C recapitalization remains on track and is supported by the equity investors as well as the existing lenders to the business,” Karin Fourie, a spokeswoman for Cell C, said by e-mail. “All lenders have expressed their support for this process, which remains ongoing.”
There’s no certainty that Telkom, which only started mulling an offer after being approached by the banks, will go ahead with a deal, one of the people said. Representatives for Telkom and Blue Label declined to comment.
For Telkom, the former state landline monopoly, buying Cell C would help expand its mobile operations and better compete with South African market leaders Vodacom Group Ltd. and MTN Group Ltd. The Pretoria-based company, about 39 percent owned by the South African government, held talks with Cell C’s owner Oger Telecom Ltd. in 2015 about buying the carrier but failed to agree on a price. Telkom has been cutting jobs and investing in broadband and mobile to counter falling demand for landline services.

‘Good Deal’
“This will be a good deal for Telkom and its mobile business, but it has to be at the right price,” said Peter Takaendesa, a portfolio manager at Mergence Investment Managers Pty Ltd. “Getting Cell C and its infrastructure will help Telkom to significantly scale its mobile business.”
Telkom’s stock rose as much as 3.8 percent before paring gains to trade 0.6 percent up at 69.70 rand by 11:19 a.m. in Johannesburg. Blue Label jumped as much as 2.8 percent before trading unchanged.
Johannesburg-based Blue Label planned to expand Cell C’s network and recapitalize its debt. The deal is opposed by CellSAf, a Cell C minority investor which last year filed a legal claim to block Blue Label’s bid, saying it would unfairly dilute its shareholding.