South Africa’s telecommunications landscape looks set for a shake-up with the first steps towards the unbundling of Telkom and Vodacom on the cards.
This week Middle Eastern telecoms company Oger announced that it had made an offer to buy a share in Telkom, South Africa’s effective fixed-line monopoly.
Telkom’s response was to put out an announcement stating it would consider the offer. By the end of trading on Tuesday its share price had rocketed by 7,44% to R135,11.
Oger Telecom’s parent company, Saudi Oger, already owns a majority share in South Africa’s third mobile operator Cell C, which leaves the possibility of a merger or outright acquisition open.
But with very few details available it’s still not clear exactly who would be interested in buying who and how the deal or merger would be structured.
Any deal between Cell C’s controlling shareholder and Telkom could open the door for the sale of Telkom’s 50% shareholding in Vodacom, with Vodafone having first option.
Telkom and Vodacom’s relationship has been fractious of late, as the two telcos have increasingly gone up against each other in a converging sector.
Oger could also see a potential deal as a way to boost Cell C’s profitability, as the mobile operator has battled to break beyond its 10% market share.
South African consumers would also benefit, with a possible deal giving Cell C the competitive edge it needs to really take on mobile giants Vodacom and MTN.
“If this had to happen we would be fortunate as consumers because it is likely to generate more competition than the current market setup,” said one analyst who did not want to be named. “From a competition- authorities perspective there may still be some issues, but significantly less than a potential merger between Telkom and MTN.”
Late last year Telkom and MTN were locked in discussions that were said to involve the sale of Telkom’s fixed-line assets to the mobile operator, but the talks resulted in nothing and analysts felt that the mooted deal would never get past the competition authorities.
Richard Hurst from BMI-TechKnowledge says the offer from Oger made sense because it fitted in with the telcos’ strategy for looking to developing markets. But he pointed out that the deal would not make sense in terms of Telkom’s strategy to expand into Africa.
Another analyst said that Cell C had financial problems and the deal may be a way of “patching holes in a sinking ship”.
Although Oger has been rumoured to be looking for an exit strategy from Cell C for a while, Saudi Tele-com recently purchased 35% of the company for $2,6-billion. At least part of these proceeds will be used to fund the potential deal with Telkom.
Oger chief executive Paul Doany told journalists in Istanbul this week that it has submitted an offer to Telkom that he described as being in the “interest of both Telkom and our Cell C”.
Telkom said that it was still busy with its mobile strategy review and that it was not currently in discussion with Oger, although it would consider the expression of interest.