Re­struc­tur­ing of Cell C gets nod

Business Day - - FRONT PAGE - Mudiwa Gavaza Tech­nol­ogy Writer gavazam@busi­

The re­struc­tur­ing of SA’s third-largest mo­bile oper­a­tor, Cell C, which will re­sult in new share­hold­ers, has been ap­proved by the Com­pe­ti­tion Com­mis­sion.

The re­struc­tur­ing of SA’s third­largest mo­bile oper­a­tor, Cell C, which will re­sult in a change in share­hold­ers, has been ap­proved by the Com­pe­ti­tion Com­mis­sion.

The re­cap­i­tal­i­sa­tion, which is aimed at re­duc­ing Cell C’s debt, is ex­pected to garner R4bn in fresh cap­i­tal, ac­cord­ing to Bloomberg.

Cell C has strug­gled to make con­sis­tent prof­its since its launch in 2001, car­ry­ing R8.7bn in debt on its bal­ance sheet. The oper­a­tor’s de­clin­ing for­tunes have prompted its largest share­hold­ers, Blue La­bel Tele­coms and Net1, which to­gether hold 60% of its eq­uity, to write down their com­bined R7.5bn in­vest­ment to nil. Blue La­bel has pre­vi­ously in­di­cated it could take its cur­rent 45% stake in the mo­bile oper­a­tor down to about 30%.

On Thurs­day, the Com­pe­ti­tion Com­mis­sion said it has rec­om­mended to the Com­pe­ti­tion Tri­bunal to con­di­tion­ally ap­prove the pro­posed trans­ac­tion in which newly cre­ated en­tity Gatsby SPV in­tends to ac­quire cer­tain as­sets of Cell C.

Gatsby SPV’s own­ers chose to re­main anony­mous.

Cell C says it is pleased with the out­come. “This is an im­por­tant step towards con­clud­ing a com­plex re­struc­tur­ing for the mo­bile oper­a­tor,” it said.

The trans­ac­tion is still sub­ject to Com­pe­ti­tion Tri­bunal ap­proval. By law, the com­mis­sion in­ves­ti­gates an­ti­com­pet­i­tive complaints and merg­ers and ac­qui­si­tions, and makes rec­om­men­da­tions on the fair­ness of trans­ac­tions or ac­tions by com­pa­nies. The fi­nal say rests with the tri­bunal, which makes an or­der or de­ter­mi­na­tion.

While the com­mis­sion found that the pro­posed trans­ac­tion did not raise any other public in­ter­est con­cerns, among other things, it has noted that the merg­ing par­ties are cur­rently not in a po­si­tion to con­firm who will be ap­pointed as trustees.

“There­fore, the com­mis­sion be­lieves that the pro­posed trans­ac­tion may raise com­pe­ti­tion con­cerns,” it said. These in­clude, among oth­ers, an­ti­com­pet­i­tive in­for­ma­tion ex­change should the trustees in­clude in­di­vid­u­als from firms that com­pete with Cell C or present undis­closed com­pet­i­tive over­laps.

The com­mis­sion said to rem­edy this po­ten­tial risk, it rec­om­mends that the pro­posed trans­ac­tion be ap­proved sub­ject to con­di­tions that Gatsby SPV and the trust will not be owned or con­trolled by com­pa­nies that com­pete or may com­pete with Cell C or firms that have a cus­tomer-sup­plier re­la­tion­ship with Cell C.

De­spite this ap­proval, Cell C re­mains cautiously op­ti­mistic un­til the deal has been fully con­cluded and all re­quire­ments have been met.

Cell C said that “var­i­ous stake­holder en­gage­ments” are still needed and long-form trans­ac­tion agree­ments still have to be con­cluded be­fore the deal is fi­nalised.

Dou­glas Craigie Steven­son, Cell C’s CEO, said: “A re­cap­i­tal­i­sa­tion is an im­por­tant pil­lar of Cell C’s turn­around strat­egy. We are be­ing dili­gent and thor­ough to en­sure it is a trans­ac­tion that meets all con­di­tions, and con­tinue to en­gage with all stake­hold­ers.

“In our minds it is not done and there is still work to do, but we are pleased with the progress to date.”

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