Cell C, Telkom Mobile urged to merge

SMALLER mobile operators Cell C and Telkom Mobile had to be encouraged to merge as the telecoms environment did not allow for many players, Vodacom group chief executive Shameel Aziz Joosub said.

A merger would help Cell C and Telkom Mobile cut costs as they consolidated expenses.

The two should be encouraged to consolidate even from an infrastructure perspective, because the industry required well-funded small operators, he said.

Presenting Vodacom's annual results, Joosub said it was becoming increasingly costly to run a network.

His comments came after Vodacom announced on Monday it had entered into an agreement to acquire Neotel, South Africa's second fixed-line operator, for about R7-billion.

Joosub said the deal with India's Tata would be concluded once regulatory approvals had been received.

Commenting further on the need for consolidation in the telecoms industry, he said: "The business is capital intensive, you need deep pockets. We should be encouraging consolidation between the third and fourth operator."

Cell C is South Africa's third largest mobile operator and Telkom Mobile is the fourth.

The consolidation discussion was stirred by former Cell C boss Alan Knott-Craig last year.

Last week, MTN group chief executive Sifiso Dabengwa weighed in on the discussion, saying consolidation was inevitable.

A senior industry analyst said there was a need for small operators to pool resources in order to gain real traction.

Turning to Vodacom's performance in the year ended March 31, Joosub said the mobile operator had done well under challenging conditions, but the reduction in termination rates had resulted in a 21.7% decline in interconnect revenue received.

Mobile termination rates are fees operators pay to carry each other's calls.

Vodacom, which is South Africa's largest mobile operator by subscriber numbers, said there had been a significant growth in data use in the period under review.

Data revenue increased 23.6% to R10.9-billion and represented 22.7% of service revenue, compared with 18.4% in the previous year.

Vodacom also reported a 9.5% surge in its active prepaid customers, adding 2.3 million net connections, to 26.7 million. - Samuel Mungadze