Struggling Cell C exposed to Telkom overtures

CELL C’s continued financial woes could scupper its plans for a tie-up with Blue Label Telecoms and pave the way for other suitors, including Telkom, to make a play for the struggling mobile network operator.

According to a source close to the parties involved, Cell C is racing against time to raise the funding required for its deal with Blue Label.

Speculation is rife that Telkom has made overtures to Cell C. If Telkom’s talks with the company proceed, this would be the fixed-line operator’s second attempt to buy Cell C in less than two years. Takeover talks were terminated in November 2015 because of a disagreement on price.

Cell C is already in advanced talks with Blue Label about a potential deal that could see the prepaid airtime and electricity distributor take up 45% in the business. Cell C management and its staff would own 25%, while 3C Telecommunications, a subsidiary of Oger Telecom, would have a 30% holding.

According to the source close to the talks, Telkom believed it had what was needed to save Cell C. The source said Cell C’s debt was about R23-billion and that last month it missed debtors’ payments, resulting in a downgrade from S&P Global Ratings.

When contacted on Tuesday, Cell C referred all questions to Telkom, which in turn said it did not comment on speculation.

Cell C and Blue Label reiterated on Tuesday that the recapitalisation process remained on track. Cell C said the process was supported by its equity investors as well as the existing lenders to the business. The recapitalisation would reduce the debt to R6-billion.

Blue Label spokesman Michael Campbell said “we understand that Cell C continues to progress [with the] restructuring to establish a sustainable capital structure”.

He said the downgrading by S&P had no direct effect on Cell C’s “underlying business and its operational remains strong”.

The source close to the talks said Blue Label was pushing for the deal with Cell C as its contract with Vodacom was up for review. The deal with Cell C would result in a conflict of interest as Blue Label would compete directly with its clients – MTN, Vodacom and Telkom. But Blue Label has previously said it would continue to honour its contracts. — BDLive performance