The share price of Telkom tumbled on Monday morning while Blue Label Telecoms rose after MTN South Africa and Cell C announced they had signed a massively expanded roaming deal.
Telkom fell more than 5% shortly before 10am in Johannesburg as investors fretted that the tie-up could make it more difficult, expensive and complicated for the company to buy Cell C.
Blue Label, which owns 45% of Cell C, was trading more than 5% higher on the news.
On Friday, Telkom said it was pursuing an acquisition of its rival. “The potential acquisition will be subject to Cell C completing a financial restructuring to ensure that its gearing levels are reduced to a sustainable level as specified by Telkom and commercial contractual relationships are renegotiated to terms acceptable to Telkom,” it said in a statement to shareholders.
The signing of the expanded roaming agreement is a significant step forward for Cell C. The deal with MTN was a prerequisite for an impending recapitalisation of the troubled company led by the Buffet Consortium, whose members include billionaire property mogul Jonathan Beare.
The roaming deal will effectively result in Cell C becoming a large mobile virtual network operator, or MVNO, though “Cell C and MTN will maintain their spectrum and each party will use its own frequencies”.
“Cell C will still have all of its licences and control its core network, transmission, billing system and subscriber management,” it said. However, management of the radio access network (base stations providing access to consumers) will be provided by MTN nationally.
In 2018, Cell C and MTN entered into an initial roaming agreement that provided 3G and 4G services in areas outside the main metros. The expanded roaming agreement extends this coverage and gives nationwide roaming to the benefit of Cell C subscribers, Cell C said. — (c) 2019 NewsCentral Media