“Such transaction, if successfully concluded, may have a material effect on the price of Telkom’s securities,” said Telkom.
“Telkom is currently performing due diligence on Cell C.”
The confirmation comes following reports that Cell C’s owners Oger Telecom rejected a R14-billion bid by Telkom for the mobile operator.
According to Bloomberg, Telkom made the offer for Oger’s 75% stake in Cell C, citing a person familiar with the matter.
Oger, which wants up to R22 billion for Cell C, set a deadline of late November for a renewed offer, according to the report.
A POTENTIAL takeover of Cell C by Telkom is stalling over the price.
Telkom on Monday issued a cautionary announcement saying it was in discussions that may affect its share price, but did not divulge more information.
But it is known to be in talks with Cell C and according to Bloomberg, it wants to pay less than R20bn, at which the mobile operator’s owners value it.
Cell C believes that Telkom now needs it more than it needs the buyout as others have expressed interest in it.
Telkom’s plan for a tie-up with MTN was thwarted by the Competition Commission, leaving it with few options.
Cell C CEO Jose dos Santos said last week that if Telkom wanted to buy Cell C it had to "write out a cheque," indicating its unwillingness to budge.
"Cell C has reinvented itself. No one gave the company hope. Now competitors want to buy us because we are a good asset and it comes with a premium," he said.
Cell C was operationally profitable and had seen a "healthy growth" in earnings before interest, taxes, depreciation and amortisation. Mr dos Santos confirmed during a radio interview last week that the company had held talks with Telkom about a potential takeover.
According to Bloomberg, Telkom is prepared to pay no more than R18bn for the business. Cell C’s 75% shareholder, Dubai-based Oger Telecom put the higher price tag on the company, which includes R14bn of debt, said Bloomberg, quoting sources.
Oger Telecom said last month it had received six bids for Cell C.
Telkom operates SA’s fourth-biggest mobile phone provider and is seeking to grow the business to help offset declining sales at its fixed-line unit. Cell C has 22-million customers, behind market leaders Vodacom SA with 33-million at the end of June and MTN SA, which recorded 27.9-million customers at the end of March. Telkom Mobile has just more than 2-million customers. A combined Cell C and Telkom Mobile would result in a customer base that is closer to MTN.
Telkom chairman Jabu Mabuza last month said he saw the acquisition of Cell C as a way to expand.