CELL C SET FOR A TAKEOVER
Competition Commission finalising terms
CELL C is set for a takeover by one of the largest network providers, with the Competition Commission finalising the terms of the transaction.
Business Report understands that the sale would likely see Africa’s biggest network provider, MTN, assuming a significant stake in Cell C.
On Tuesday, the Competition Commission briefed Parliament’s portfolio committee on trade and industry on the terms of the transaction.
MTN dismissed the Cell C purchase as speculation. “MTN does not comment on market speculation,” said a company spokesperson.
But Cell C confirmed the merger without disclosing who the interested party was.
The group said the merger was part of a restructuring process that began last year. It said it was involved in ongoing discussions with financiers and relevant stakeholders to finalise the transaction.
“These discussions are of a confidential nature. Cell C will make an announcement upon conclusion of its restructuring process,” said the company.
Cell C has been in distress for years, with a R9 billion debt burden and several own goals that placed it on the back foot relative to its rivals.
In March, the group introduced a turnaround strategy focused on restructuring its balance sheet and improving its overall liquidity.
Cell C also negotiated an extended roaming agreement with MTN, to enable it to have access to MTN’s network in areas where it does not have coverage after moving away from Vodacom in favour of MTN’s infrastructure.
Industry experts believe the roaming agreement signalled the merger between the two companies.
Cell C’s new chief executive, Douglas Craigie Stevenson, previously said the roaming agreement was meant to manage its network capacity requirements in a more scalable and cost-efficient manner. “This will also provide access to current and future technologies,” he said.
Problems at Cell C resulted in JSElisted Blue Label Telecoms, which paid R5.5bn for a 45 percent stake in Cell C, writing off their full equity ownership in the company to zero last year.
Cell C defaulted on repaying interest on an R2.7bn loan note that was due in December, as well as interest and capital repayments related to the respective bilateral loan facilities with Nedbank, China Development Bank
Corporation, the Development Bank of Southern Africa and the Industrial and Commercial Bank of China which was due in January 2020.
Cell C said it was starting to see green shoots, and its operating loss during the year to the end of December 2019 narrowed to R3.94bn from R7.36bn in 2018.
Cell C reported a 21 percent decline in prepaid customers to 2.9 million in 2019, and said the margin on existing customers was better as a result of acquiring profitable customers.
Commissioner Thembekile Bonakele told the portfolio committee on trade and industry that the anttrust body was working on finalising the terms of the merger.
“We have seen firms in distress which include an acquisition of Cell C. Cell C has been in trouble for a while now. We have a merger before us that we are finalising, that should see Cell C being rescued and surviving and those jobs being saved,” Bonakele said.