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Telkom hints at imminent acquisition

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Telkom has cautioned shareholders it is discussions with unnamed parties, which may result in an acquisition.

SA’s smallest mobile carrier by subscriber numbers issued a note on the Johannesburg Stock Exchange during morning trade, saying: “Shareholders are advised that Telkom is in discussions in relation to a potential acquisition, which if successfully concluded, may have a material effect on the price of the company’s securities.

"Accordingly, shareholders are advised to exercise caution when dealing in the company’s securities until a further announcement is made.”

The news came in minutes after the company announced its half-year results and the rumour mill immediately went into overdrive suggesting the target is Cell C.

Cell C recently told ITWeb it “will keep the door open to any conversations that will assist the company’s future viability”.

This after market speculation emerged the company was in talks with China Mobile in a potential takeover bid.

The troubled Cell C, which recently put core parts of the business up for sale, has been struggling with R8.2 billion of debt and deepening losses.

The embattled telco’s net debt, excluding finance leases, has ballooned from R7.44 billion to R8.24 billion, which Cell C claims was driven by increased capital expenditure and working capital drawdown facilities.

Cell C recently reported a loss of R8 billion for the year ended May from a previous year loss of R656 million.

The company suffered major setbacks this year, receiving three downgrades by rating agency Standard & Poor’s over its debt.

In April, the agency lowered Cell C’s issuer credit rating to CCC- from CCC+, placing it deeper in trouble territory.

In June, the operator was once again downgraded after it renegotiated terms of its R1.4 billion debt, and in August, it received a downgrade for the third time for its debt profile.

This is not the first time Telkom has been reportedly considering making an offer to buy a majority stake in Cell C.

In December last year, it was reported in the media that Telkom was seeking management control of Cell C.

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