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8ta to derive ‘little benefit’ in Cell C merger

TELKOM chief financial officer Jacques Schindehutte has outlined why a merger between Cell C and Telkom’s cellphone company 8ta would offer little benefit on face value.

Schindehutte said yesterday that Cell C could offer 8ta “below the 1000 megahertz” radio frequency spectrum, but 8ta could not use much of Cell C’s older second-generation network. He added that Cell C could offer its management expertise, but that the operator had also experienced its own problems in recent times.

Schindehutte said a merger would give 8ta a shorter period to break even or assist both companies to reduce their collective expenditure on network infrastructure.

Telkom spent R2.1 billion in capital outlay this half year and it would spend between R5bn and R6bn to year-end in March.

“I personally have my reservations as to whether a full-on merger would take us out of our misery,” he said.

Schindehutte said Cell C, like 8ta, was battling with low average revenue per user and interconnection fees that did not favour third and fourth operators in the industry.

The start-up’s market share grew to 2.2 percent during the period compared with 0.9 percent in September last year.

Telkom chief executive Nombulelo Moholi said there was still no formal proposal from Cell C but that Telkom would not reject an offer offhand.

Moholi said Telkom was focusing on making its network more data-centric and the company would introduce more data-consuming applications.

Telkom’s fixed-line voice usage revenue plummeted 10 percent to R4.4bn. However, ADSL data subscribers rose by more than 46 000 to 841 831.

Frost & Sullivan industry analyst Gladys Mujuru said the improvement in 8ta and the increase in data subscribers were due to price decreases.

She said regulatory-driven price decreases and increased competition, particularly in the form of fixed-cellular substitution, were expected to continue placing pressure on Telkom revenues. – Asha Speckman

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