Restructuring of Cell C gets nod

The restructuring of SA’s third-largest mobile operator, Cell C, which will result in new shareholders, has been approved by the Competition Commission.

The restructuring of SA’s thirdlargest mobile operator, Cell C, which will result in a change in shareholders, has been approved by the Competition Commission.

The recapitalisation, which is aimed at reducing Cell C’s debt, is expected to garner R4bn in fresh capital, according to Bloomberg.

Cell C has struggled to make consistent profits since its launch in 2001, carrying R8.7bn in debt on its balance sheet. The operator’s declining fortunes have prompted its largest shareholders, Blue Label Telecoms and Net1, which together hold 60% of its equity, to write down their combined R7.5bn investment to nil. Blue Label has previously indicated it could take its current 45% stake in the mobile operator down to about 30%.

On Thursday, the Competition Commission said it has recommended to the Competition Tribunal to conditionally approve the proposed transaction in which newly created entity Gatsby SPV intends to acquire certain assets of Cell C.

Gatsby SPV’s owners chose to remain anonymous.

Cell C says it is pleased with the outcome. “This is an important step towards concluding a complex restructuring for the mobile operator,” it said.

The transaction is still subject to Competition Tribunal approval. By law, the commission investigates anticompetitive complaints and mergers and acquisitions, and makes recommendations on the fairness of transactions or actions by companies. The final say rests with the tribunal, which makes an order or determination.

While the commission found that the proposed transaction did not raise any other public interest concerns, among other things, it has noted that the merging parties are currently not in a position to confirm who will be appointed as trustees.

“Therefore, the commission believes that the proposed transaction may raise competition concerns,” it said. These include, among others, anticompetitive information exchange should the trustees include individuals from firms that compete with Cell C or present undisclosed competitive overlaps.

The commission said to remedy this potential risk, it recommends that the proposed transaction be approved subject to conditions that Gatsby SPV and the trust will not be owned or controlled by companies that compete or may compete with Cell C or firms that have a customer-supplier relationship with Cell C.

Despite this approval, Cell C remains cautiously optimistic until the deal has been fully concluded and all requirements have been met.

Cell C said that “various stakeholder engagements” are still needed and long-form transaction agreements still have to be concluded before the deal is finalised.

Douglas Craigie Stevenson, Cell C’s CEO, said: “A recapitalisation is an important pillar of Cell C’s turnaround strategy. We are being diligent and thorough to ensure it is a transaction that meets all conditions, and continue to engage with all stakeholders.

“In our minds it is not done and there is still work to do, but we are pleased with the progress to date.”