Shares in Telkom soared shortly after markets opened in Johannesburg on Friday as investors took cheer from the fact that the partially state-owned telecommunications operator won’t be burdened with rival Cell C’s debt problems.
Telkom said at 8am, before trading on the JSE commenced, that its offer to buy Cell C — the value of which was not disclosed — was rejected by the mobile operator’s board.
Telkom said investors no longer needed to exercise caution in dealing in its securities, suggesting it does not intend pursuing a hostile bid for the company.
Shares in Telkom were trading about 5% higher shortly after 9am. Shares in Blue Label Telecoms, which owns 45% of Cell C, were slightly softer, down 0.6%.
The decision by the Cell C board to spurn Telkom’s overtures now paves the way for a recapitalisation of the business in a transaction led by the Buffet Consortium and other, unnamed investors. Cell C is labouring under about R9-billion in interest-bearing debt.
The operator’s new management team, led by CEO Douglas Craigie Stevenson and chief financial officer Zaf Mahomed, has said previously that it expects the recap to be concluded by the end of the year.