Cell C rejects Telkom proposal

Published Feb 23, 2017

Share

Johannesburg – Cell C has rejected a bid from Telkom,

which had reportedly offered R13 billion to buy the debt laden cellular company

out.

In a statement, chairman of SA’s third mobile operator, Mohammed

Hariri, said Cell C is already involved in a deal with Blue Label.

Under the Blue Label agreement, which dates back to

October, the prepaid service provider will pay R5.5 billion for a 45 percent

stake in Cell C.

That deal is part of Cell C's efforts to pay down debts

which last year forced it into a restructuring with bondholders involving a

three-year maturity extension to July 2018.

Cell C, founded in 2001 by Saudi Arabia's Oger Telecom,

has struggled to compete against established players Vodacom and MTN Group.

Following Blue Label's deal, Cell C will also issue new

shares to staff, senior management and existing shareholders to help to reduce

it borrowings to a maximum of R8 billion, said Blue Label at the time.

Separately, Net1 UEPS Technologies said it had entered

into an agreement with Blue Label to subscribe for about 117.9 million shares

for R2 billion. Net1 will own about 15 percent in Blue Label and expects to

settle the transaction through a combination of cash, debt plus an equity issuance

of five million shares, the company said.

Read also:  Telkom said to mull R13bn bid for Cell C

Last week, Bloomberg – quoting sources – reported that

Telkom was looking at a bid worth as much as $1 billion for Cell C.

Hariri, noting that Telkom had submitted received an

unsolicited, non-binding and conditional proposal, said the board has a

responsibility to be transparent and keep staff, customers and stakeholders

informed around news reports on potential mergers.

Hariri explains that Cell C has “undertaken to not enter

into any agreement, incur any obligation or take any action which may restrict

it or any of its affiliates from complying with its obligations under such

agreements or which could result in the transactions envisaged in such

agreements not proceeding to completion.

“Cell C has every intention of complying with its

obligations under such agreements.”

As a result, Hariri says, Cell C has told Telkom that it

is “unable and not willing to pursue any discussion and has rejected its

proposal”.

Blue Label’s deal has an end-February deadline.

Telkom, 39 percent owned by the South African government,

held talks with Cell C’s owner Oger Telecom in 2015 about buying Cell C but

failed to agree on a price.

Telkom has been restructuring and streamlining its

operations in a bid to counter falling demand for fixed phone lines. Its mobile

arm has finally turned profitable on an operating level and its plan is

starting to take off.

BUSINESS REPORT

ONLINE

Related Topics: