Brutal battle wages over control of Cell C
A bruising corporate battle is set to play out over the next two days over the control of mobile operator Cell C.
The country’s third biggest operator has struggled to compete with giants Vodacom and MTN and operate profitably, making it a constant target for a takeover or a merger. The latest suitors, Telkom and Blue Label Telecoms, are going head-to-head for a stake in Cell C.
Undeterred by the Cell C board’s outright rejection of its R7 billion offer to buy the operator’s debt and acquire equity, Telkom is furiously lobbying lenders to back its bid ahead of Tuesday’s D-day for the finalisation of the deal. The deal between Cell C and JSE-listed Blue Label Telecoms entails Blue Label taking a 45% stake for R5.5 billion.
The landscape-changing deal could be scuppered over the next 48 hours if some of Cell C’s lenders warm to Telkom’s wooing, which in itself would drastically alter the mobile communications terrain.
This could happen as Chinese bank ICBC initiated contact with Telkom, asking it to help the heavily indebted Cell C. Other lenders who have bought into the Blue Label deal – including local banks – could switch sides in the next two days.
Also likely to stand in the way of the tie-up is the resistance of black empowerment vehicle CellSAf which, City Press understands, is planning to interdict the deal before Tuesday as it believe it will dilute its shareholding and prejudice its investment. CellSAf owns 25% of Cell C’s holding company 3C.
A 25% black shareholding was one of the conditions on which Cell C got its licence from the Independent Communications Authority of SA, and there are concerns that this could be compromised. But Cell C management maintains that shares to be placed in an employee participation trust would deal with this.
If the Telkom bid succeeds, it will put the combined new entity in a strong position to challenge Vodacom and MTN. Like Cell C, Telkom Mobile has struggled to break the stranglehold of the two giants.
“Telkom believes the industry and customers will benefit from a strong third mobile player that would break the current duopoly,” an insider said.
Heightening the tensions in what is turning out to be an ugly corporate battle was the decision by the Cell C board to turn down the Telkom proposal within 24 hours of its tabling. This raised the ire of Telkom executives, who believe the offer was not properly considered by the board members, most of whom are from the Dubai-based majority shareholder Oger Telecom and stand to benefit from the Blue Label deal.
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