Orange might be thinking of buying Cell C, say analysts – and it's not the first time
- Global telecoms company Orange's CEO says the company is considering an entry into the South African market within months.
- Analysts think the fastest way to enter SA would be by investing in - or just outright buying - Cell C
- If so, this may be not the first time Orange has tried to buy Cell C. It was reportedly considering just that in 2015, but was put off by the high asking price
- For more articles, go to www.BusinessInsider.co.za.
Could the struggling Cell C be a takeover target for the global telecoms giant Orange? Analysts think so.
France’s largest telecom group, Orange, is considering entering South Africa, its CEO told Los Echos business newspaper.
“It could make sense to be in economies such as Nigeria and South Africa,” Stephane Richard said, according to a Reuters report. “If one considers there are things to do, the time frame I am considering is rather a few months than a few years.”
It’s highly likely that Orange is, in fact, seriously considering South Africa.
“It would be a surprise if they were not looking for new ways to enter these markets, rather than the fact that they are considering it,” says Arthur Goldstuck, technology analyst at World Wide Worx.
According to analysts polled by Business Insider, the short timeframe means Orange is possibly looking at entering into business with Cell C – either buying it outright, or entering into some form of partnership agreement.
“One option for any major global player coming into this market is the potential availability of Cell C for acquisition,” says Goldstuck. “The company is being brought onto an even keel from an operational point of view, and becoming more viable to integrate into larger organisations operating globally.”
If that is the way Orange is thinking, this this may not be the first time it considers acquiring Cell C. In 2015, Orange was rumoured to be in discussions with the SA telecommunications operator when its then majority shareholder, Dubai-based Oger Telecom, was looking to sell it’s 75% stake.
“Orange was speaking to Cell C in the past, when Oger was looking for a buyer. But the price was just too high,” says Dobek Pater, telecommunications analyst at Africa Analysis.
“Orange is already a big player in Africa,” says Pater. “But If you want to be a continental player, then there are a handful of markets you need to be in – one of them is South Africa.”
“The fastest way of entering SA market would be through Cell C,” he says. Cell C has been struggling with its debt in recent years and, earlier this year, defaulted on a R2,7 billion loan that was due at the end of December.
“I think the asking price would be much lower because of the debt, says Pater. And, frankly, I think Blue Label Telecoms is tired of operating it.” Blue Label is the largest shareholder in Cell C, and wrote down its interest in the company in May last year.
Both analysts pointed out that Orange already has a strong wholesale presence in South Africa through Orange Business Services and its points of presence in Johannesburg and Cape Town.
“There is a parallel for using such presence as a springboard to moving aggressively into this market,” says Goldstuck “Amazon Web Services initially opened points of presence in the same cities, then expanded that to physical infrastructure, and last month opened their first data centres on the African continent, in Cape Town.”
“They’ve certainly got a history of trying to enter South Africa,” says Pater of Orange. “It would be a strategic move for them. They’re already in Botswana and Madagascar.”
Would that mean lower prices for consumers as competition increases? It depends on how Orange decides to enter South Africa, says Pater.
If Orange does go the Cell C route, they have two options: improve Cell C’s infrastructure, which would mean building cellphone towers, or continue roaming on MTN’s network, as Cell C currently does.
One way of quickly improving infrastructure would be to aggressively invest in 5G service. South Africa’s sought-after 5G spectrum is due to go up for auction later this year. That would mean Orange gets its own operator license, which means lower prices and greater choice for consumers.
“Or they could take over where Cell C is now, and roam on MTN’s infrastructure,” says Pater. “Then they couldn’t compete on price, so they would need to introduce new products.”
Orange has been investing heavily in financial services products. It is also the largest media services firm in France, which mean it could potentially over media content products in South Africa.
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