Blue Label deal with Cell C debtors

Binding umbrella restructure agreement is announced

CELL C’s recapitalisation bid received a shot in the arm yesterday after Blue Label Telecoms announced “a binding umbrella restructure agreement” with the telecommunications company’s debt providers, an unnamed third party investor and other “relevant” parties.

The deal will culminate in the reduction of Cell C’s debt from approximately R20 billion to R6bn, giving the mobile operator much-needed flexibility in a maturing and fiercely competitive market that has experienced slowing revenues and squeezed margins.

Since it entered the market in 2001, Cell C has played second fiddle to its bigger competitors, MTN and Vodacom.

But the looming restructuring of the debt-ridden Cell C has not been universally accepted.

The company’s black equity partner, CellSAf – which owns 25 percent of Cell C’s holding company, 3C Telecommunications – has lashed out at the deal.

In a statement on Sunday, CellSAf vowed to block the restructuring and threatened legal action if the deal went through as planned today.

Tough talk It alleged that the Cell C board had not consulted it.

But despite the tough talk, Blue Label yesterday announced the agreement, which would see it buying 45 percent of Cell C, which is South Africa’s third network provider, for R5.5bn.

Blue Label said an unnamed third party would subscribe for 15 percent of Cell C’s share capital for R2bn.

Shortly after Blue Label’s announcement, Cell C yesterday afternoon rubbished CellSAf ’s allegations, branding them baseless.

Cell C chairman Mohammed Hariri, said the company had “consistently” followed lawful and good-governance practices.

“In that regard, the directors who represent CellSAf in 3C Telecommunications, the sole shareholder of Cell C, received all necessary documentation and information pertaining to the recapitalisation plan and were fully informed throughout the process.

“Two of the directors representing CellSAf in 3C Telecommunications approved the recapitalisation plan in December 2015,” said Hariri.

He said that since December 2015, CellSAf had launched several unsuccessful and illconceived legal proceedings to block the recapitalisation plan.

In the no-holds-barred statement, Hariri said CellSAf took the various steps in order to gain “an undeserved and unwarranted financial gain”.

CellSAf was yet to offer what he said was a credible alternative to the recapitalisation

4.55% The rise of Blue Label shares on the JSE yesterday

plan.

“Furthermore, CellSAf’s claim that it is expected to assume additional liabilities of almost R3bn is completely untrue.

“It is important to note that CellSAf holds a 25 percent debt-free and unencumbered stake in 3C Telecommunications and therefore has no liabilities.

“Contrary to its claims in the media, CellSAf has also never provided any financial investment or operational support to Cell C since its launch,” he said.

Cell C said Oger Telecom, the company’s parent company, supported the recapitalisation plan and would receive no payout “whatsoever” from the implementation of the recapitalisation plan.

Disappointed “The Cell C board is disappointed by CellSAf ’s statements given that the recapitalisation of Cell C will ensure a sustainable business for all concerned, including CellSAf.

“The recapitalisation plan brings new cash equity as well as the contribution of strategic partners into Cell C, both of which are critical to Cell C’s continued growth and success.

“It is a transaction that the board believes is in the best interests of not only Cell C’s shareholders, employees, lenders and suppliers, but also the South African public,” said Hariri.

CellSAf director Zwelakhe Mankazana yesterday maintained that CellSAf had not been consulted, saying the transaction had been carried out clandestinely.

“This transaction was done behind the back of the (black economic empowerment) shareholder,” said Mankazana.

He declined to comment further but said Cell C’s statement was factually incorrect.

Blue Label shares rose 4.55 percent higher on the JSE to close at R18.61.