Equity partner opposes Cell C’s plans
Cell C’s black equity partner, CellSaf, has threatened to scupper Blue Label Telecoms’ significant investment in the cellphone operator.
On Sunday, the minority shareholder accused Oger Telecom of not working in the best interest of Cell C and threatened legal action if Blue Label’s proposed acquisition of a 45% interest in Cell C went ahead on Tuesday.
Should the black empowerment partner succeed in derailing the R5.5bn investment into Cell C, it could complicate the operational viability of the debt-laden operator. CellSaf owns 25% of Cell C’s holding company, 3C Telecommunications. Saudi Arabia’s fixed-line and mobile network operator, Oger Telecom, owns the rest.
If the deal went ahead as expected this week, CellSaf’s indirect shareholding in Cell C would be reduced to 7.5%. CellSaf would be expected to assume additional liabilities of almost R3bn, CellSaf said.
CellSaf chairman Mathews Phosa said the shareholders would not allow Cell C’s black equity to be diluted. Cell C’s black economic empowerment credentials were “key to the awarding of its licence. It will be illegal and improper for the stake to be diluted,” he said.
CellSaf has requested a meeting with Oger Telecom for a possible “commercial solution”. If this failed, it would seek legal action, Phosa said.
CellSaf has approached the Independent Communications Authority of SA (Icasa) to intervene in the proposed tie-up. Icasa has yet to receive the details of the deal from Cell C and Blue Label.
Through a R5.5bn subscription for stock, Blue Label will buy a 45% stake in Cell C as part of a recapitilisation programme aimed at significantly reducing its crippling R23bn debt.
According to CellSaf, Cell C’s board, which is dominated by Oger Telecom representatives, is not working in the best interests of the company and other stakeholders, including all its lenders. CellSaf claims that the board is denying its rightful 25% director representation.
It said Oger Telecom’s parent, Saudi Oger, was expected to be released from its onerous debt guarantor obligations as soon as the transaction was concluded.
Oger Telecom had issued guarantees of R9.8bn.
“We believe there have been
and remain other options to manage Cell C’s capital structure requirements but those alternatives will not see the light of day while the Cell C board is doing the bidding of just one shareholder, namely Oger Telecoms,” said CellSaf director Zwelakhe Mankazana.
Last week, Telkom proposed to pay R7bn for a 65% stake in Cell C but that was rejected by Cell C’s board because it had already entered into agreements with Blue Label. According to sources, Telkom has not given up on Cell C and is talking to some of the major creditors in a bid to get them to reject the Blue Label deal and convert their debt into equity. Some creditors have yet to sign off on the deal.
Mankazana said: “Any intervention to stabilise Cell C should protect the interest of all the shareholders as well as all the lenders and guarantee genuine empowerment for its shareholders and employees. The 3,000 employees of Cell C need a stable and well-run company, not a placatory employee empowerment deal for which the business knows funding is unlikely to be secured.”
CellSaf claims that if the employee scheme is unable to raise R2bn within 12 months, its 15% stake reverts to Cell C for only R100. If the deal with Blue Label is concluded, six members of senior management, including the CEO and the chief financial officer, will be granted a 10% stake in the business at a nominal cost of R2,000, according to CellSaf.
Cell C and Blue Label hope to have secured written approvals from the lenders by Tuesday as part of the last steps needed for the deal to be closed.
But Phosa is unfazed about the pending deadlines. “We won’t be bulldozed,” he said.
Oger Telecom and Icasa could not be reached for comment.