South Africa’s 3rd-largest telco embarks on acquisition spree

South Africa’s third-largest mobile phone company after MTN and Vodacom, Cell C announced that it plans to more than double its spending this year by embarking on an acquisition drive.

Chief Executive Officer of Cell C, Jose Dos Santos at a results presentation in Johannesburg said that the company’s capital expenditure will increase from R1.2 billion ($103.14 million) in 2017 to R3 billion ($257.83 million) in 2018, according to Bloomberg.

The company which got a R5.5 billion ($472.18 million) recapitalization from Blue label telecoms has already acquired local fibre providers IConnect and Greencom.

The acquisitions will help transform it into a full-service telecommunications provider offering both internet and financial services as well as traditional calls and texts.

“We are in the process of doing the right acquisitions and partnerships to be able to provide everything from content, insurance, and possibly even financial services that all goes along with well-priced data and broadband services. We want to start generating different revenue streams,” Chief Executive Officer Jose dos Santos, 54, said in an interview with Bloomberg.

The recapitalization by Blue Label Telecoms helped Cell C reduce its debt by more than  70 percent. This made it possible for Cell-C to compete with its top two rivals. This deal took both companies two years to compete due to regulatory approvals and legal actions from minority shareholders. Currently, Blue Label has 45 percent stake in the company. Cell C has 16 million subscribers compared with Vodacom’s 40 million subscribers and MTN’s 30.9 million subscribers.

Cell C’s latest results for the year ended 31 December 2017  showed a lot of positive growth. Its service revenue increased by 12 percent to R13.2 billion ($1.13 billion), Total Revenue increased by 7 percent to R15.7 billion ($1.35 billion), EBITDA grew by 15 percent to R7.8 billion (669.61 million), Net profit increased by 660 percent to R4.1 billion ($351.87 million), Total Subscriber grew by 6 percent 16.3 million and its Capital Expenditure was  R1.2 billion ($102.99 million)which is 8 percent of its revenue.

During the second quarter of 2018, Cell C plans to release a full triple play offering that will include unlimited and uncapped fibre, mobile voice, and data and entertainment services through our Black platform,” said Dos Santos.

Surprising South Africa is currently faced with the challenge of slow internet connection and high data cost just like some other African countries. This has been criticised by most industry participants including government, large companies, and consumers. In 2016, an ICT white paper was published and it emphasized the need for more competition in the ICT sector in order to help reduce prices and stimulate growth. According to Tech Central, one of the bottlenecks that need to be addressed urgently in the sector is the high-demand spectrum. Spectrum has become the subject of significant interest, as a new solution has been proposed in the recently released Electronic Communications Amendment Bill. The bill was published on 17 November 2017 and industry players had until 31 January 2018 to provide inputs. The bill provides an alternative to the problem of how the high-demand spectrum should be assigned. It proposes that the remaining spectrum should be assigned to a wireless open-access network (Woan) provider; a concept that was introduced in the white paper.

The introduction of a Woan would see competition in the sector moving away from infrastructure-based to service-based competition.