Virgin Mobile denies Cell C bid

Johannesburg, 08 May 2007

Virgin Mobile has denied it has made a bid for a majority stake in SA's third mobile operator, Cell C. However, an analyst says several other telecoms players could potentially be interested.

Industry speculation has been rife recently that Virgin Mobile, which operates on Cell C's network, could be one of the companies that expressed interest in buying a major shareholding in the reportedly ailing mobile operator.

However, Nicholas Maweni, Virgin Mobile's head of corporate affairs, says he is not aware of such a bid being made. "I also spoke to two of our board members and they're also not aware of something like that happening."

Additionally, Virgin Mobile operates as a mobile virtual network operator in most of its operations worldwide, and acquiring a stake in a network operator would not be in line with this model, Maweni says.

"Virgin Mobile positions itself as a band with fans, and we do things to please those fans. Buying a network operator, with its attendant responsibilities, would not be in line with this philosophy," he says.

Cell C, which recently stated that it was on an upward swing and would double its subscriber base by 2010, confirmed that there is interest in buying shareholding in the company.

Zeona Motshabi, Cell C's chief corporate officer, says it is strictly a shareholder issue, and Cell C management will only focus on turning the company around.

"The decision to disinvest or stay is, therefore, purely a business decision facing the shareholders - one that all shareholders face in the normal course of business," she says

Media reports also indicate that 60% direct shareholder, Oger Telecom, is open to offers. Empowerment partner Cellsaf holds 25% of Cell C, while Middle East-based Lanun Securities holds 15%.

Possible suitors

Despite recent reports by Cell C that it is doing well, an analyst, who prefers to remain anonymous, argues that the third mobile operator is in a real predicament, with a very weak balance sheet. It faces two formidable opponents and its market share has dropped below 10%, he says.

"They are not even in the 3G space, and that could push them out of the market."

The analyst says there has been much speculation that Altech may be interested. It already has WiFi and WiMax initiatives, and has indicated that it wants to move up the communications food chain.

The analyst says it is also speculated that Telkom, Vodacom and Neotel are potential bidders for Cell C. If Telkom did bid for Cell C, it would resurrect speculation about what it intends to do with its stake in Vodacom, he explains.

Neotel is also seen as a prospective bidder, as it could bundle cellular and fixed-line offerings, which could be an attractive option for the company, he says.

Internationally, the analyst notes, Portugal Telecoms has expressed interest in the African continent as recently as last week. Cell C may be an option for them, he says. It may also be an option for Celtel and Telenor, if they are looking to grow their geographic spread, he says.

BMI-TechKnowledge senior analyst, Richard Hurst, says Cell C is likely to seek partners that are able to share some of the risk and bring operational expertise to the table.