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Cell C in multi-billion rand tower sale

Johannesburg - Cell C is considering selling its towers to UK firm Eaton Telecom, in a deal that will be the foreign firm's first investment in South Africa and at a stroke cancels a significant portion of Cell C's debt overhang.

Neither company would confirm a deal on Tuesday, but suggested they were in the final stages of discussions. Earlier, Eaton announced it was establishing operations in Tanzania and planned to grow its operations in South Africa. The company also has a presence in Nigeria and Ghana.

Eaton Telecom CEO Alan Harper said that he could confirm talks with Cell C, but nothing more.

"There will be an independent tower player or two in South Africa in the coming months," said Harper.

Cell C CEO Lars Reichelt would not confirm a deal, but affirmed that the company was close to tying up a deal with an independent tower company.

"I can't confirm anything yet, but we are close to coming to a decision," he said.

He added that an announcement is likely to be made in the next four weeks. Eaton is one of three companies Cell C has been in discussions with concerning a possible tower acquisition.

Harper said that Eaton Telecom has already established a business development base in South Africa under the guidance of Pieter Nel, former CEO of Dimension Data's Plessey Group.

Cell C has been looking for a buyer for its tower network in South Africa, with a view to reducing its debt and building up cash for expanding operations. 

The company currently has about R6.6bn in debt after successfully converting R6.4bn worth of shareholder loans into equity.

Cell C has restructured its distribution network, is establishing new retail presences throughout South Africa and is also rolling out HSDPA+ broadband technology on its network.

Infrastructure sharing between network operators is increasingly common in mature markets, where cellular operators are seeing the benefits of raising capital by disposing of dormant assets and then leasing multi-tenant infrastructure.

In Tanzania, Eaton Telecom will build new towers as well as acquiring existing infrastructure. The towers will then be leased to cellular networks, with multiple operators being able to set up equipment on a single tower.

Possible customers in Tanzania include Vodacom Group [JSE:VOD] and Zantel - the fastest-growing telecommunications group in the country.

Eaton aims to operate 1 000 towers in Tanzania, of which about 150 will be new while the others are to be acquired.

Harper said substantial inter-operator talks have been held in South Africa.

"In South Africa we are seeing further pressure on tariffs with lowering average revenue per user, along with economic pressure to adjust cost bases down. This is one way of doing that."

 - Fin24.com
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