Cell C investors brawl over spectrum ownership
Cell C’s two largest shareholders are at loggerheads over the ownership of the company’s multibillion-rand spectrum.
CellSAf, which owns 25% of SA’s fourth-largest mobile operator, has accused the biggest shareholder, Blue Label, of stripping other shareholders of key strategic assets amid plans to transfer control of the telecom company’s licences, including spectrum, to Blue Label’s The Prepaid Company.
Nomonde Mabuya, CellSAf’s director, said it has lodged a formal objection with the telecom regulator to block Cell C’s application to transfer control of its licences. She said CellSAf learnt of the application via a Government Gazette issued by the Independent Communications Authority of SA (Icasa) in December.
Blue Label Telecoms has, however, rejected claims that it is trying to take over Cell C’s telecom and spectrum licences.
On December 6, Icasa published an application in the Government Gazette by Cell C, which seeks to transfer control of its electronic communications and spectrum licences to The Prepaid Company, a unit of Blue Label Telecoms.
This followed the August 2023 announcement by Blue Label, which has a 49.53% stake in Cell C, that it plans to take a controlling role in the mobile operator. The transfer application is said to be part of this process, but CellSAf opposes this.
Mabuya told Business Day Blue Label cannot take full control of these licences, particularly the spectrum licence, without consulting other shareholders.
If Icasa were to let the transfer happen, “CellSAf will be left with nothing”, she said. “That is why we can’t allow this. Essentially, if they want to control the licence 100%, they must pay us for our 25% because that is the shareholding that we have within Cell C. That was gazetted. So they can’t transfer the licence to any other owner without speaking to a 25% shareholder.”
Brett Levy, co-CEO of Blue Label, told Business Day that this is not the case. The application and its implication have been misunderstood.
“What has been reported on is that we are transferring the assets out of Cell C. The spectrum and everything [else]. That’s utterly incorrect.
“We are a shareholder of a company and we are applying for control in the company.
“So we’re not transferring anything out. We’re not taking the licence out; we’re not moving anything. Everything still remains in Cell C.” around According’to Cell C s operating Levy, conditions licence dictate that if there is to be a change in control of the mobile operator, then permission has to be sought from Icasa.
While permission to take a controlling stake is normally done through competition authorities, legislation around such a move in telecoms also requires that permission is granted by the regulator.
“Right now, no-one controls Cell C. We are just applying for control in Cell C,” Levy said.
“Everything that is in Cell C remains in Cell C the day after we take control. Nothing leaves. Cell C is [still] a licence holder.
Cell C is still the spectrum holder,” Levy said.
Mabuya said the right thing to do is for Blue Label to bring all the shareholders together and chart a way forward.
“If they want to take over control, they should just pay us what is rightfully due to us. But to just do a transfer without first engaging with us, without telling us what the implications are, and we just read it in a gazette, I don’t think that’s being fair to us.”
CellSAf estimates Cell C’s trove of spectrum assets to be worth between R6bn and R7.8bn.
Spectrum has been a thorny issue in SA’s telecom industry after the country went for more than a decade without new radio frequencies being issued. When Icasa finally held the country’s first spectrum auction since 2004/05, state coffers received a healthy R14.4bn, showing the value of these assets.
The group, run by brothers Mark and Brett Levy, completed the long-awaited recapitalisation of the troubled mobile company in September 2022. The mobile network operator has struggled to make a profit since it opened for business in 2001.
It had been laden with longterm debt of R8.7bn, prompting Blue Label and Lesaka Technologies (formerly Net1), which previously had a 15% stake, to write down their combined R7.5bn investment to nil. Four years after this writedown, the prepaid specialist positively revalued the Cell C investment on its books to R962.5m.