According to local press reports, South Africa’s Vodacom Group Ltd is in talks with Cell C Pty Ltd about taking on the smaller operator’s contract-paying customers.
If this move goes ahead it would cement Vodacom’s position as the leading operator in the country. Though the talks have not yet been concluded, a successful outcome could mean Vodacom adding a little more than one million contract subscribers to its business.
Cell C and its biggest shareholder, Blue Label Telecoms Ltd, are reportedly dealing with debts of over $630 million. This deal would involve Vodacom paying a fee to Cell C and would remove some of the servicing requirements Cell C faces, notably handset subsidies and credit checks. On a slightly less positive note, as part of a drive to slim its operations, it could also allow Cell C to cut jobs and close stores.
However, compared to prepaid subscribers, contract customers generate a significant amount of income, on which Cell C would no longer be able to rely, though it also has a number of broadband customers.
This deal would certainly boost Vodacom’s own contract business, which, at an estimated 5.8 million subscribers, is marginally behind MTN Group. The extra million predicted would enable it to overtake MTN.
Meanwhile Cell C’s future remains uncertain. In November it rejected a takeover offer from Telkom SA that would have brought together South Africa’s third and fourth-largest mobile-phone companies. At its peak, Cell C boasted over 20 million subscribers in South Africa.