BEE con­sor­tium in­sists Cell C’s re­cap­i­tal­i­sa­tion is un­law­ful and wants a public hear­ing

CityPress - - Business - JUSTIN BROWN justin.brown@city­press.co.za

Cell C’s em­pow­er­ment part­ner, CellSaf, is keep­ing up its fight against the takeover of the mo­bile op­er­a­tor by a num­ber of com­pa­nies, in­clud­ing Blue La­bel Tele­coms. CellSaf is con­test­ing the mat­ter in the high court and has also lodged com­plaints with the Com­pe­ti­tion Com­mis­sion and the In­de­pen­dent Com­mu­ni­ca­tions Au­thor­ity of SA (Icasa).

In a new de­vel­op­ment, it ap­pears in­creas­ingly likely that the CellSaf com­plaint to Icasa could get a public hear­ing. Cur­rently, the com­plaint is be­ing dealt with be­hind the scenes by Icasa to­gether with CellSaf and Cell C.

This week, a Cell C rep­re­sen­ta­tive said: “We are await­ing Icasa’s de­ci­sion as to whether to ac­cept Cell C’s po­si­tion or to re­fer the mat­ter to Icasa’s Com­plaints and Com­pli­ance Com­mit­tee for ad­ju­di­ca­tion.”

Nomonde Mabuya, di­rec­tor and com­pany sec­re­tary of CellSaf, said there “must be a public hear­ing” re­gard­ing CellSaf’s com­plaint to Icasa.

A re­fer­ral to the Icasa com­mit­tee could see a public hear­ing on the CellSaf com­plaint be­ing held.

Icasa spokesper­son Paseka Maleka said CellSaf’s com­plaint was be­ing dis­cussed in­ter­nally.

She did not re­ply to ques­tions about whether Icasa would re­fer the mat­ter to its com­plaints com­mit­tee.

Mabuya said the com­mis­sion had given CellSaf un­til Novem­ber 17 to re­ply to Cell C’s re­sponse to its com­plaint.

This week, Cell C dis­closed in a road­show pre­sen­ta­tion that the op­er­a­tor had posted a loss of R588 mil­lion for the first half of this year, com­pared to an in­terim profit of R3 mil­lion in the first six months of 2016. This de­spite in­creas­ing its sub­scriber base to 15.7 mil­lion – up from 14 mil­lion at the end of June last year.

Ty­rone Soon­dar­jee, Cell C chief fi­nan­cial of­fi­cer, said the rea­son for the net loss in­cluded for­eign ex­change and fi­nance charges.

Zwe­lakhe Mankazana, a CellSaf board mem­ber, said that with Cell C mak­ing losses or barely mak­ing prof­its, there was “no way” that the debt that the CellSaf share­hold­ers owed could be paid back.

“We have re­ceived no div­i­dends since in­cep­tion,” Mankazana added.

Mabuya said: “This is a bla­tant act of fronting.” Mankazana said the Cell C road show could mean that the com­pany was seek­ing to list and to ce­ment the Blue La­bel Tele­coms deal.

Soon­dar­jee said the road show was not part of plans to list Cell C on the JSE or any other bourse.

CellSaf is ar­gu­ing that the re­cap­i­tal­i­sa­tion deal with Blue La­bel will see the con­trol of Cell C chang­ing and, should it be con­cluded in its cur­rent state, Cell C will lack a suf­fi­cient em­pow­er­ment stake.

In a com­plaint to Icasa, filed in July – which City Press has seen – CellSaf writes: “We put for­ward the ar­gu­ment that since Cell C was granted the li­cence with CellSaf as the in­te­gral BEE en­tity that was specif­i­cally scru­ti­nised and ap­proved by the min­is­ter of com­mu­ni­ca­tions and the au­thor­ity, it can­not be uni­lat­er­ally di­luted and re­placed by an­other en­tity, with­out just cause and the same level of scru­tiny and ap­proval from rel­e­vant au­thor­i­ties.”

CellSaf has been op­pos­ing the trans­ac­tion from the date that it first be­came aware of it: De­cem­ber 10 2015.

In the same writ­ten com­plaint to Icasa, the BEE con­sor­tium goes on to state: “CellSaf sub­mits that the pro­posed trans­ac­tion amounts to a change of con­trol and a pledge and ces­sion of con­trol in the in­di­vid­ual li­cence granted to Cell C.”

CellSaf con­tends that the struc­ture of the takeover by a con­sor­tium led by Blue La­bel Tele­coms does not con­sti­tute “gen­uine em­pow­er­ment” and calls on Icasa to sub­ject the deal to “ap­pro­pri­ate scru­tiny”.

Re­fer­ring to the lengthy le­gal case re­gard­ing the buy­out of Neo­tel by Vo­da­com, CellSaf said the court had ruled that a 30% BEE own­er­ship must be present at the time of ap­pli­ca­tion and Icasa had no dis­cre­tion to post­pone com­pli­ance with this re­quire­ment.

In Oc­to­ber 2014, Icasa pub­lished a no­tice in the Gov­ern­ment Gazette declar­ing that it would no longer ap­prove li­cence trans­fer ap­pli­ca­tions which did not have a 30% BEE eq­uity own­er­ship, CellSaf said.

CellSaf’s Mankazana es­ti­mates that Cell C has an em­pow­er­ment in­ter­est of 20%, in­clud­ing the 7.5% stake that the BEE con­sor­tium has been al­lo­cated in terms of the con­tested deal.

CellSaf has called on Icasa to probe Cell C’s claims that it has met or ex­ceeded the 30% BEE eq­uity own­er­ship re­quire­ment.

“We sub­mit that the struc­ture of the ... pro­posed trans­ac­tion is un­law­ful and prej­u­di­cial to both Cell C and CellSaf,” writes CellSaf to Icasa.

CellSaf also ar­gues that Cell C and the par­ties to the deal are in breach of com­pe­ti­tion laws and reg­u­la­tions.

“CellSaf sub­mits that the pro­posed trans­ac­tion con­sti­tutes a no­ti­fi­able merger that has been prior [sic] im­ple­mented. In this re­gard, CellSaf has made a for­mal sub­mis­sion to the com­mis­sion.”

CellSaf is look­ing to Icasa to re­store the BEE con­sor­tium to its orig­i­nal own­er­ship po­si­tion, as well as to set aside the trans­ac­tion and im­pose ap­pro­pri­ate penal­ties.

On Au­gust 30, Icasa is­sued a state­ment ac­knowl­edg­ing that it had re­ceived a no­ti­fi­ca­tion from Cell C re­gard­ing the change of share­hold­ing at the com­pany: “The au­thor­ity has con­sid­ered the no­ti­fi­ca­tion, and the pre­lim­i­nary view is that the Cell C re­cap­i­tal­i­sa­tion trans­ac­tion – on the face of it – trig­gers the pro­vi­sions of sec­tion 13 of the Elec­tronic Com­mu­ni­ca­tions Act of 2015 and ought to have been filed as an ap­pli­ca­tion for change of con­trol of the li­censee.”

Sipho Ng­wema, head of com­mu­ni­ca­tions at the Com­pe­ti­tion Com­mis­sion, said this week that CellSaf’s com­plaint was still un­der in­ves­ti­ga­tion.

Cell C said, as part of its in­vestor pre­sen­ta­tion, that it had “made the nec­es­sary no­ti­fi­ca­tion to Icasa”.

“Based on many and var­i­ous de­tailed le­gal opin­ions from em­i­nent se­nior coun­sel ob­tained by the par­ties to the re­cap­i­tal­i­sa­tion, Cell C has, in fact, fol­lowed the cor­rect process,” it stated.

“Cell C has now made ex­ten­sive writ­ten and oral sub­mis­sions to Icasa, pro­vid­ing de­tails of the struc­ture and ef­fect of the trans­ac­tion.”

Cell C said the re­cap­i­tal­i­sa­tion deal with Blue La­bel was not a merger within the mean­ing of the Com­pe­ti­tion Act. “Cell C has now made an ex­ten­sive sub­mis­sion to the Com­pe­ti­tion Com­mis­sion to ex­plain the fac­tual and le­gal po­si­tion as to why this is not a no­ti­fi­able merger.”

Turn­ing to CellSaf’s lit­i­ga­tion, filed with the Jo­han­nes­burg High Court in Novem­ber last year, Cell C said that if the mat­ter was heard in court, this would be un­likely to be be­fore 2019.

In re­sponse, Mabuya said Cell C’s state­ment about the 2019 hear­ing showed the de­lay tac­tics be­ing used by the mo­bile op­er­a­tor to keep the case out of court.

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