One of Cell C’s oldest shareholders, CellSAf, plans to vigorously oppose the transfer of control of Cell C’s network and spectrum licences to Blue Label Telecoms at public hearings on 19 September 2024.
This is according to CellSAf’s legal representative, who told MyBroadband that there is a lot of uncertainty surrounding the company’s shareholding in Cell C.
“The structure is too opaque; our client has been oppressed as a minority shareholder and is not consulted on significant decisions that affect their shareholder rights,” they said.
“To this end, our client is unable to confirm what is left of its hard-earned unencumbered 25% shareholding.”
This is due to two recapitalisation transactions — one in 2017 and another in 2022 — diluting shareholdings in Cell C.
Following the second recapitalisation, Blue Label Telecoms co-CEO Brett Levy gave an analyst presentation about Cell C, which revealed CellSAf’s shareholding to be 3%.
CellSAf said it believes the Independent Communications Authority of South Africa (Icasa) and the Competition Commission allowed the strategic merger and transfer to take place without scrutiny.
“Thus, our client was not afforded its regulatory rights to participate. It is our strong contention that all past and current transactions are a nullity for lack of regulatory compliance,” CellSAf’s legal representatives said.
As a result, CellSAf plans to “vigorously oppose” the transfer of control, saying it is an insult to BEE and isn’t compliant with the regulatory framework.
“We believe the transaction is a subversion of BEE and will strip our client of a hard-earned asset for which they paid more than a billion rand nearly twenty years ago,” its representatives said.
Last week, Icasa announced the public hearings for Cell C’s application to transfer control of its network and spectrum licences to Blue Label subsidiary The Prepaid Company.
Blue Label is Cell C’s biggest shareholder through The Prepaid Company.
In its announcement, Icasa noted that Cell C had withdrawn its application to transfer the 10MHz of 3,500MHz radio frequency spectrum it acquired during the 2022 high-demand spectrum auction.
“The hearings will not address this issue,” it stated.
Cell C has forfeited the spectrum and returned it to the regulator. It is currently negotiating to reapply for it.
This is due to a payment arrangement — which Cell C believed it had in place with the regulator — falling through.
It had bid R288 million for the 10Mhz through the auction and had paid a deposit.
“Between the changes that took place at Cell C and the changes that took place at the regulator, this thing was lost in translation,” Cell C CEO Jorge Mendes told MyBroadband.
Both Icasa and Cell C had a change in leadership since the auction.
Mendes said they are engaging with Icasa in the hopes of securing the spectrum through a new process.
The public hearings follow Icasa publishing a notice in the Government Gazette in December 2023 informing the public of Cell C’s application to transfer control of its licences. The notice said Cell C had submitted its application in September of that year.
The hearings will allow stakeholders, including CellSAf, to submit their concerns over transferring Cell C’s licences.
CellSAf had previously voiced concerns about the transfer of Cell C’s network and spectrum licences, saying it was not consulted about the transfer and that the mobile operator’s application was submitted without its knowledge.
CellSAf director and company secretary Nomonde Mabuya emphasised that the company doesn’t support Cell C’s application.
“This licence transfer matter was never discussed with us. The first time we learned about it was when we saw the ICASA government gazette published on 6 December 2023,” said Mabuya.
She added that it was particularly concerning that Cell C and TPC parent Blue Label Telecom had kept the application from it, considering they regularly engage with CellSAf.
CellSAf submitted its objection to the planned licence control transfer on 29 December 2023.
Mabuya said CellSAf is concerned that the move will help Blue Label strip shareholders of Cell C’s critical strategic assets.
However, Cell C says it is legally obligated to transfer control of its network and spectrum licences due to amendments to the Electronic Communications Act and a clarifying note Icasa published in 2014.
It explained that Icasa differentiates between licence ownership and control, and that this was an application for transfer of control.
Cell C said that following a further cash injection from The Prepaid Company, the shareholder wants a controlling stake in the company, which triggered the transfer of control application.