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Telkom Slump Deepens After Cell C Signs Roaming Pact With Rival

Telkom Slump Deepens After Cell C Signs Roaming Pact With Rival

(Bloomberg) --

Telkom SA SOC Ltd. shares extended their slump in Johannesburg after its acquisition target, Cell C Pty Ltd., agreed to an extended roaming deal with rival MTN Group Ltd.

Telkom stock has sunk to its lowest in almost a year and is down 17% in the past four days. The company said Nov. 15 it was in talks to buy Cell C and combine South Africa’s third and fourth-largest mobile-phone companies. Monday’s MTN-Cell C news “reduces visibility on Telkom’s offer,” Citigroup Inc. analysts including Dilya Ibragimova wrote in a note.

Telkom Slump Deepens After Cell C Signs Roaming Pact With Rival

“The timing of the announcement may signal that Cell C may not be entirely happy with the terms of Telkom’s offer,” the Citi analysts wrote. A consolidation in the South African market from four to three players is not Citi’s base case, they wrote.

Telkom Slump Deepens After Cell C Signs Roaming Pact With Rival

The news “definitely makes the potential acquisition by Telkom much more complicated as it further entrenches MTN’s reach over the Cell C user base, and forces Telkom to potentially pay a higher future price should there be an acquisition of Cell C, which is already a concern in the market as Telkom may not have the balance sheet capacity to take on the acquisition,” Lester Davids, an analyst at Johannesburg-based Unum Capital, said by email.

Telkom dropped 2.1% Monday to the lowest since Nov. 26, 2018. Cell C’s 45% shareholder Blu Label Telecoms Ltd. jumped 8%. MTN fell 0.3%, while cross-town rival Vodacom Group Ltd. lost 1.5%.

--With assistance from Joe Easton.

To contact the reporter on this story: Adelaide Changole in Nairobi at achangole2@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen

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