Creditors lobby for Cell C deal

Cell C creditors are not giving up on a takeover offer from Telkom, which SA’s third-largest mobile network operator rejected last week.

Cell C creditors aren’t giving up on a takeover offer from rival Telkom, which SA’s third-largest mobile network operator rejected last week.

Senior debt holders have hired investment-banking firm Moelis & Co and corporate lawyers Linklaters and DLA Piper to lobby for the Telkom proposal, say informed sources.

They could block Cell C from pursuing an alternative recapitalisation plan by forcing the carrier into liquidation or business rescue, said the sources, asking not to be identified because talks were continuing.

A Telkom takeover would return about 86c on the rand to lenders, while banks might have to take a haircut if Cell C went ahead with a transaction involving local investment company Buffet Group, they said.

Creditors were also requesting that Cell C’s board act independently from majority shareholder Blue Label Telecoms, the sources said.

“The board is continuously approached by various parties. We remain focused on executing our turnaround strategy,” Cell C said in response to questions.

“Independent financial and legal advisers have been appointed representing the lenders and constructive discussions on the recapitalisation are underway with them and other stakeholders in respect of various proposals.” Linklaters, DLA Piper and Moelis declined to comment, while Buffet Group could not be reached.

Telkom said it had not had any further communication from Cell C. It’s not the first time Cell C has spurned advances from Telkom, which wants to combine the country’s two smallest network operators to better compete against industry leaders MTN and Vodacom.

After running into financial difficulties in 2016, Cell C opted for a deal with Blue Label, which now owns 45% of the company. In July, Cell C missed interest payments and suspended future obligations, resulting in S&P Global Ratings cutting Cell C’s assessment to default. The company, which generates about R15bn in revenue, is struggling to repay about R9bn in debt.

“This restructuring involves confidential discussions with various stakeholders, including Cell C’s board, shareholders, financiers and professional advisers,” Cell C said on Monday.

“We acknowledge public interest in Cell C’s restructure, however, we request confidentiality in the process and will update the market in due course.”

Cell C agreed to an extended roaming agreement with MTN in November that will give it access to MTN’s network. As part of that pact, Cell C will pay as much as R5bn a year in roaming charges, from about R1.8bn, the people said. Lenders haven’t been given a chance to review the deal, they said.

86c what lenders would get in the rand with a Telkom takeover

R9bn What Cell C owes its creditors