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Cell C is a 'takeover target' for France Telecom-Orange

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South Africa’s third largest mobile network operator by subscribers, Cell C, may be an acquisition target for French multinational telecoms company, France Telecom-Orange.

This is according to research firm Pyramid Research, which says France Telecom -Orange could plan to purchase a South African operator or enter the country’s market as a Mobile Virtual Network Operator (MVNO).

The research firm says that apart from Cell C, other possible buy-out options for the France-headquartered telecoms firm could be Telkom-owned mobile operator 8ta or even fixed line operator, Neotel.

“Each of these possible acquisitions would clearly require different levels of engagement and different strategies, with Cell C being closest to France Telecom’s core business and comfort zone,” says Pyramid Research in a report.

Pyramid’s report has been released after France Telecom-Orange launched Orange Horizon in South Africa last month. Orange Horizon was launched with the purpose of seeking out business opportunities in countries where the company is not already present as a mass-market telecommunications provider.

In the Middle East and Africa, France Telecom-Orange says it operates in almost 20 countries and has over 70 million customers in the region.

Dobek Pater, director at Africa Analysis, has told ITWeb Africa that as France Telecom-Orange continues its expansion drive, South Africa has become an attractive market.

Pater, though, doubts the telco could look to purchase 8ta or Neotel.

But he agrees that Cell C may be the strongest possible acquisition target, especially as the telco has a smaller user base as compared to its big rivals.

Late last year, Cell C said it surpassed the 10 million subscriber mark, making it more of a ‘medium-sized’ player in a South African market where Vodacom and MTN dominate with respectively 31-million and 23.5-million connections.

“One of two things can happen: the first would be to buy Cell C as an operator and if that doesn’t happen the second would be to launch a Mobile Virtual Network Operator (MVNO) network on Cell C’s infrastructure,” said Pater.

“They obviously can’t acquire MTN or Vodacom because they are two big groups and that’s a lot of money we’re talking about; so, Cell C is definitely the next best target,” he explained.

“Their strategy over the past few years has been to grow their WiMax or 3G platform focusing on data more than voice, so expansion plans would focus on data presence in the market,” Pater added.

Pyramid Research further predicts that France Telecom-Orange plans to launch an MVNO in South Africa in the next two years, a move that is seen to be part of the company’s regional Africa and Middle East MVNO strategy.

Pyramid Research predictions’ also coincide with forecasts made by the International Data Corporation (IDC), which state that Africa's first major consolidation transaction in the telecoms space could occur in 2013, similar in model to the UK’s Everything Everywhere (EE).

The report titled the ‘African Telecommunications Market Top 10 Predictions for 2013', says a mobile service provider similar to EE could emerge in South Africa or Kenya.

EE is the UK’s largest mobile operator, and was formed through the consolidation of France Telecom-Orange and T-Mobile businesses.

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