Telecommunications group Telkom on Friday confirmed that it was in discussions to buy out embattled Cell C.
Telkom on Monday announced that it was in negotiations regarding a possible transaction, sparking speculation that it was in negotiations with Cell C.
Telkom on Friday said it had substantially concluded its due diligence but said discussions were at a preliminary stage.
"The potential acquisition will be subject to Cell C completing a financial restructuring to ensure that its gearing levels are reduced to a sustainable level as specified by Telkom and commercial contractual relationships are renegotiated to terms acceptable to Telkom," it said in a statement.
Cell C, meanwhile, confirmed that it had received a nonbinding offer from Telkom.
"Cell C remains focused on ensuring operational efficiencies, restructuring its balance sheet, implementing a revised network strategy and improving overall liquidity.
"It confirms previous market communication that negotiations for an expanded roaming agreement are at an advanced stage," the company said in a statement.
It pointed out that independent financial and legal advisers had been appointed, representing the lenders, and that constructive discussions on the recapitalisation were under way with them as well as other stakeholders in respect of various proposals.
Cell C had posted a net loss of R8-billion for the financial year to May 31. This had included R6.2-billion in noncash impairments.
It is also heavily indebted, with 45% shareholder Blue Label Telecoms having come under fire from its shareholders this year for having bought an interest in the mobile operator, given its estimated R9-billion in debt.
Cell C has entered into negotiations with fellow mobile operator MTN regarding a national roaming agreement, which Cell C believes will reduce its costs and capital expenditure, while also helping it to restructure the business.