Orange has no plan to buy Cell C

Cell C may be sold as the majority shareholder looks to offload its shares. (Duncan Alfreds, Fin24)
Cell C may be sold as the majority shareholder looks to offload its shares. (Duncan Alfreds, Fin24)

Cape Town - While the future of Cell C is uncertain, global telecoms operator Orange has no plans to buy a majority share in the operator.

Reports have suggested that Cell C's majority shareholder, Dubai-based Oger Telecom is considering selling its 75% stake in the South African mobile network.

France headquartered Orange does not have a mobile network operation in South Africa but it does sell mobile phones and provide enterprise and Wi-Fi services in the country.

Orange has previously said that it is looking for a stronger footprint in South Africa. However, Orange officials say they haven't had any discussions with Cell C.

"Currently there are no discussions for acquisition between Orange and Cell C, nor any other mobile network operators in South Africa," Sèbastien Crozier, Orange Horizons CEO told Fin24.

Reuters had reported that Oger had appointed Goldman Sachs to oversee the selling of its shares which would allow the telco to exit the local market.

It cited the Independent Communication Authority (Icasa) of South Africa's decision to revise its Mobile Termination Rates (MTRs) as the reason for its desire to sell Cell C.

Mobile virtual network operation

Icasa had ruled that MTRs - or the rate that operators pay each other for calls that terminate on their networks - had to be reduced.

However, the reductions are asymmetrical in that it gives junior operators Cell C and Telkom Mobile more leverage to be aggressive on pricing.

However, after legal wrangling from Vodacom and MTN, the regulator adopted the long-run incremental cost plus (LRIC) model as a cost standard to determine the cost of mobile and fixed wholesale voice call termination.

That means that Cell C and Telkom Mobile will not earn the revenue boost from MTR that they had hoped.

For Orange, which dominates markets in Botswana, Egypt and Cameroon among others, being a mobile player in SA is not the ultimate goal.

The company believes that its best option is to build a mobile virtual network operation in order to offer value to consumers.

"Entering the MVNO (Mobile Virtual Network Operator) market in South Africa remains one of the objectives of Orange, in order to be able to provide convergent services to South Africans," said Crozier.

'Market conditions'

This strategy would free the company of having to build a physical network of base stations, but enable it to provide SIM cards to local consumers.

Crozier though, threw cold water on the idea that the Orange network offer was imminent.

"However, Orange will only do so when the market conditions become favourable for MVNOs, and allow us to contribute positively to competition in the market. This requires certain amendments to the regulatory environment, and/or a willingness from MNOs (mobile network operators) to give enough economic space for a new MVNO to exist."

In SA, Virgin Mobile has demonstrated that the MVNO market is fraught with difficulty. While the company launched as a joint venture with Cell C in 2006, it has still to hit one million subscribers in the country.

Orange has instead decided to be a market disruptor in SA by selling smartphones and other smart gadgets online and often cheaper than traditional distribution channels.

It has also launched a Wi-Fi service as a precursor to becoming a fully fledged ISP in SA.

"Orange wants to develop its activities in South Africa because we consider the market attractive by its size, but also because we feel we can offer added value to local customers," said Crozier.

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