Troubled Cell C has once again pushed back against efforts by Telkom to buy it, as its board sent a letter bluntly telling the South African telco it’s not interested in the offer.
“Telkom has received written notice from the Cell C board of directors rejecting its non-binding proposal,” Telkom informed investors on Friday.
“The Telkom Board continues to believe the offer is a compelling proposition that would have created significant value for all stakeholders including Telkom’s shareholders.
“As the offer has been rejected by Cell C’s board of directors, Telkom shareholders are advised that they are no longer required to exercise caution when dealing in Telkom securities.”
Last month, Telkom confirmed it was in talks to buy struggling mobile phone operator Cell C.
Cell C is 45% owned by JSE-listed Blue Label Telecoms, 15% by Net 1, 3 Special Purpose Vehicles (SPVs) collectively hold 30% (in turn held by 3C Telecommunications and further in turn held as 29.4% by the Employee Believe Trust, 45.6% by Oger Telecoms and 25% by broad-based black empowerment grouping CellSAf); and Cell C Management and Staff hold 10%.
At the time, Telkom said it has substantially concluded its due diligence.
Blue Label Telecoms and Net 1 have written down to zero the value of their stake of the embattled mobile network, Cell C, which recently reported an R8 billion loss in the year to June, hit by impairments.
Cell C is unable to compete against bigger rivals, Vodacom, MTN and Telkom.
Its woes are having a negative impact on JSE-listed Blue Label Telecoms, which owns almost half of the mobile phone company.
After Telkom confirmed its interest to buy Cell C, MTN South Africa announced a new long-form roaming and services agreement with Cell C, subject to certain conditions precedent.
In May 2018, Cell C signed its first roaming agreement with MTN, providing Cell C with 2G, 3G and 4G roaming services on MTN’s network in select areas of South Africa.
The new agreement will see this access expanded to enable Cell C to roam on MTN’s network in all areas of the country.
Cell C believes that the agreement will result in substantial cost-savings for Cell C by reducing network and CapEx spend through an extensive roaming arrangement.
The mobile phone company is under increasing pressure on its liquidity due to its high level of debt and the associated servicing costs.
During the third quarter of fiscal 2019, Cell C signed a term sheet with the Buffet consortium, but the implementation of this capitalization has been delayed.
As a result, Cell C requested shareholder support and in September 2019, we agreed to provide up to R300 million of support to the company through the purchase of prepaid airtime,” Net 1 in its latest annual report, informed investors.
