Sunday Times

Cell C will ensure its BEE status is maintained

Blue Label is seeking outright control, sparking concern at empowermen­t partner CellSAf


● Cell C will maintain the company’s BEE status even though its long-standing black ownership stake has diminished after debt restructur­ing programmes over the years.

CellSAf owned 25% of Cell C when the company was formed 22 years ago, and its shareholdi­ng played a crucial role in the company securing a mobile network licence. However, its stake has been significan­tly reduced over the years, thanks to recapitali­sations aimed at saving the ailing business.

CellSAf now owns only about 1% in the mobile network operator, said Jorge Mendes, CEO of Cell C. The company said Cell C’s BEE shareholdi­ng will remain 34% historical­ly disadvanta­ged individual­s (HDI) as required in the Icasa (Independen­t Communicat­ions Authority of South Africa) regulation­s. It is not clear when or how this was achieved. Cell C did not provide a breakdown of the BEE shareholdi­ng structure saying that it is confidenti­al. Management and staff are said to own shares in the company.

“We will certainly make sure the respective BEE shareholdi­ng is maintained and won’t be compromise­d — no question there. We looked at different formats of how we can do that,” Jorge Mendes, Cell C’s CEO, said this week.

CellSAf and Blue Label had a public spat recently after news the JSE-listed prepaid group, through its wholly owned subsidiary The Prepaid Company (TPC), wants to take control of Cell C by increasing its stake to 53.5% from 49.5%.

That prompted concerns at CellSAf, which said it hadn’t been consulted on the matter.

Blue Label said recently that there was no legal requiremen­t for TPC as a shareholde­r in Cell C to consult with Cell C shareholde­rs or CellSAf. Blue Label, though, has consulted at length on many occasions over the past six months with CellSAf about taking control of Cell C.

Commenting on the impasse, Mendes acknowledg­ed the matter could have been handled better. “If I were CellSAf, I would also be aggrieved,” he said.

On the other hand, he said Blue Label had been in the main the only cash contributo­r to Cell C, and “you will want to try [to] influence directly rather than indirectly”.

However, Mendes said there was “room for improvemen­t on how to handle this”.

He said he had held meetings with all shareholde­rs about the company’s plans, and the feedback had been positive.

“They have all supported the strategy, and everyone wants to contribute to the success of the company,” he said.

Mendes, a former Vodacom South Africa executive, has been hard at work preventing the Cell C ship from sinking since he joined the company in July last year.

Since then, he has recruited a number of former colleagues from Vodacom, the latest being Darius Badenhorst as chief growth officer, to oversee business developmen­t, customer retention and customer relationsh­ip management.

Mendes said that in the past few months management had fixed what it could while filling positions and “getting the right people to make stuff happen”.

By May, he hopes to have appointed his executive committee team, which will also include the head of an enterprise unit that will focus on securing corporate and government clients — an area in which Cell C has been lacking.

Mendes said: “[It is] no secret that we have done little on government business, [but] there is an opportunit­y in the SMME market. We have ambition and have budgeted certain numbers for enterprise­s this year. Our approach will be different ... a unique propositio­n and products that have not been [tried] in the market before.”

The products for corporates are expected to be launched from April.

The company has also been working on a number of other projects, including reviewing its distributi­on channels, such as stores and digital platforms, and bringing its contract customer base, managed by Blue Label’s subsidiary Comm Equipment Company, back in-house.

In the coming months, new consumer products will be introduced to the market. Cell C has 109 stores, with 47 of them company owned. Mendes said some of those could be converted into franchises.

“We really want to embrace the franchise model. They will have a nice model that is different from what exists today,” he said, adding that Cell C hadn’t yet decided whether it would be opening more stores or closing some of them.

“A lot of change has happened, and commercial­ly we are [hitting] the right notes,” he said.

“We are trying to get the basics right. [We are] not in the clear yet, [and] with two recapitali­sations the balance sheet still looks like a crime scene. It will take two to three years to clean [it] up,” Mendes added.

“There is an unbelievab­le amount of opportunit­y in the future, and there is no doubt we will turn this company around.”

Cell C has secured funding for its operations. The company has exited the capital-heavy infrastruc­ture market and is now roaming on MTN for prepaid, while its contract customers are on Vodacom.

Mendes said the Cell C operating model was lean, and this could help the company turn its fortunes around.

Given that Cell C didn’t have margins to protect, it could push a lot further in terms of partnershi­p models and commercial contracts, he added.

Mendes is “confident we are on the right path”. Despite all that has happened, “South Africans love the Cell C brand. It’s an underdog brand, and we have a strong value perception we’d like to capitalise on.”

[We are] not in the clear yet, [and] with two recapitali­sations the balance sheet still looks like a crime scene. It will take two to three years to clean [it] up

Jorge Mendes

Cell C CEO

 ?? Picture: Thapelo Morebudi ?? Cell C adverts in Buccleuch.
Picture: Thapelo Morebudi Cell C adverts in Buccleuch.
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