Hedberg scuppers Telkom rumours

Johannesburg, 19 Mar 2009

Cell C CEO Jeffery Hedberg vehemently denies he has been approached by Telkom management, shareholders or its board over the possibility of taking up the leadership role at the fixed-line operator.

Media speculation, earlier this week, linked Hedberg with a possible move to Telkom, to take over from CEO Reuben September, whose popularity has slipped in recent months.

Reports suggested Hedberg, known as a turnaround specialist, could be poached by Telkom to either smooth the way for a takeover of Cell C, or to reposition the fixed-line company, which has come under increasing pressure with the liberalisation of the local telecoms market.

In a statement issued this morning, Cell C executive head of corporate communications Shenanda Janse van Rensburg scuppered speculation that Hedberg was ever in talks with Telkom.

She did confirm his contract will expire in November, and reports indicate he has decided not to renew it. It's unclear where he will go after that, since Hedberg has declined to comment further. However, he has indicated to staff that he will stay in SA.

Demanding position

Since he took over at Cell C in May 2006, Hedberg has been instrumental in the turnaround of SA's third mobile operator. He inherited an almost impossible task, given the company's large-scale debt, which includes billions in foreign currency financing and interest.

Cell C produced its first and sustained profit under his guidance. It has also made strides in growing its market share through aggressive campaigns on price, the latest of which has sparked a mobile price war in the prepaid market.

Hedberg's decision not to renew his contract has fuelled speculation around the sale of Cell C to Telkom, which will soon hand its Vodacom stake to UK-based Vodafone.

International telecoms investment firm Delta Partners recently released a report indicating a Telkom-Cell C marriage would be ideal for the mobile business.

Telkom would not respond this morning to queries as to whether it will buy Cell C, or if it planned to poach Hedberg, saying: “Telkom does not comment on speculation.”

Simple strategy

However, in an earlier interview with Telkom, the company said it had no intention of buying Cell C to bolster its own wireless strategy. The company's chief of strategy, Naas Fourie, confirmed it is not in discussions to buy any mobile operator either inside or outside of SA.

Telkom's strategy is far simpler - enabling cell-to-cell roaming on its WCDMA service and backing it up with a virtual network, roaming off the back of Vodacom.

Fourie noted the company has far more mobile experience than most people expect, since some of the expertise resources it has, worked on the roll-out of Vodacom's network.

Aside from that, Telkom also rejected an offer from 75% Cell C stakeholder Oger Telecom in March 2008. The Dubai-based operator offered Telkom a 60% shareholding in Cell C for a stake in Telkom.

Other options

While Hedberg has noted that a Telkom tie-up would be nice, there are other options outside the South African market.

According to Delta Partners' report, Cell C could become a vehicle for international players like Kuwaiti-based telecoms business, Zain, which has indicated it would like to open a South African mobile operation.

Zain competes with Oger Telecom in several of the same markets, and has 20 operations across the Middle East and Africa. Unlike Oger's stake in Cell C, Zain does not have any ties in SA.

However, Telkom rejected the Kuwaiti-based company's overtures. In an interview with ITWeb in November, Zain did not deny speculation that it would rebound from its rejection by Telkom and potentially focus on Cell C.

Zain Africa CEO Chris Gabriel said: “We cannot be specific on the deals, but all I can say is we are very interested in this market [SA] and where opportunity lies - we will assess and take it.”

Meanwhile, Cell C says Hedberg remains fully committed to ensure the team continues to provide affordable and accessible offers for its customers, while improving the company's operational and financial performance.