Sharenet portfolio manager Dylan Bradfield said it makes sense for Telkom to consider a Cell C acquisition, which could be good news for Blue Label Telecoms shareholders.
Bradfield told Biznews founder Alec Hogg that Telkom is looking to sell many of its assets, including its towers, properties, and even a stake in Openserve.
“If assets are sold, and Telkom focuses on its core – its mobile business – they would have cash on the balance sheet and room to grow,” he said.
Because of the limited market, consolidation within the South African telecommunications sector makes sense when looking for growth.
Cell C, which has a new CEO and is well-positioned for growth, would be an acquisition target from Telkom’s perspective.
When looking at Blue Label’s market cap, it is clear that investors perceive Cell C as having a negative value for the company.
“We think it is a fair reflection until we see trading statements to show they have shown they have plugged the hole in the Cell C boat,” Bradfield said.
However, it is not the same Cell C that investors grew accustomed to. It has significantly cut staff, outsourced its network, and signed new roaming agreements with MTN and Vodacom.
Former Vodacom executive Jorge Mendes has also taken over as Cell C CEO to replace acting chief executive Brett Copans.
Mendes is a mobile industry veteran who has spent the last 23 years at Vodacom in various management positions.
Cell C also appointed former MTN SA CEO Godfrey Motsa and former Vodacom corporate affairs executive Maya Makanjee to its board.
Mendes has already started to appoint a new management team, including Rachael Ayo-Oladejo, Vodacom’s former consumer business unit executive head for strategy.
Bradfield said with Mendes taking the reins at Cell C, it is well-positioned to improve its operations and win back lost ground in the mobile market.
“Mendes is an excellent operator in the mobile network operator space, and we think he is the key to unlocking value within Cell C,” he said.
“Looking at Blue Label Telecoms, if you buy the share now, you get Cell C for free.”