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Telkom slump deepens after Cell C signs roaming pact with rival

Telkom stock sinks to its lowest in almost a year.

Telkom shares extended their slump in Johannesburg after its acquisition target, Cell C, agreed to an extended roaming deal with rival MTN. 

Telkom stock has sunk to its lowest in almost a year and is down 17% in the past four days. The company said November 15 it was in talks to buy Cell C and combine South Africa’s third and fourth-largest mobile-phone companies. Monday’s MTN-Cell C news “reduces visibility on Telkom’s offer,” Citigroup Inc. analysts including Dilya Ibragimova wrote in a note.

Read: MTN, Cell C deal ‘meets regulatory requirements’

“The timing of the announcement may signal that Cell C may not be entirely happy with the terms of Telkom’s offer,” the Citi analysts wrote. A consolidation in the South African market from four to three players is not Citi’s base case, they wrote.

The news “definitely makes the potential acquisition by Telkom much more complicated as it further entrenches MTN’s reach over the Cell C user base, and forces Telkom to potentially pay a higher future price should there be an acquisition of Cell C, which is already a concern in the market as Telkom may not have the balance sheet capacity to take on the acquisition,” Lester Davids, an analyst at Johannesburg-based Unum Capital, said by email.

Telkom dropped 2.1% Monday to the lowest since Nov. 26, 2018. Cell C’s 45% shareholder Blu Label Telecoms Ltd. jumped 8%. MTN fell 0.3%, while cross-town rival Vodacom Group Ltd. lost 1.5%.

© 2019 Bloomberg L.P.

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Maybe this is a blessing in disguise?

Good thing. Telkom burnt its customer bridges years ago with arrogance and bad service.Payback time.

Agreed, their share price will continue to tumble because of that!

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