South Africa: Is Cell C Worth R1?


OK Bazaars was once sold for a nominal R1 in one of the most daring transactions in South Africa's corporate history. Are we about to see something similar in the cell phone sector?

When Shoprite's retail maestro Whitey Basson bought the loss-making OK grocery store chain for R1 from South African Breweries in 1997, some analysts wondered whether it was "too expensive". OK was bleeding money and seemed a lost cause.

Which brings us to the question analysts should be asking about the proposed acquisition of Cell C. Is the country's third-biggest mobile phone operator worth R1?

This question has been on my mind as the struggling company and its board consider whether to accept a bid from Telkom or pursue yet another recapitalisation plan for an operator that has failed to find its feet since being founded in 2001.

Cell C's debt position sits at about R9-billion and there's little in the tea leaves to suggest the mobile carrier, owned by Blue Label Telecoms, will be able to trade itself out of this debt chokehold. This is regardless of how executives pitch roaming agreements with MTN as a panacea to their ailments.

Now, don't get me wrong in the...

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