Cell C's recapitalisation may have hit a roadblock after the Independent Communications Authority of South Africa (ICASA) came out saying the telco may not have followed regulation in terms of its licence.
In a statement issued late last night, ICASA said its "preliminary view is that the Cell C recapitalisation transaction - on the face of it - triggers the provisions of Section 13 of the Electronic Communications Act of 20015 (sic)and ought to have been filed as an application for change of control of the licensee".
The regulator, however, confirmed it had received a notification from Cell C "regarding the change of licensee information, ie, change of shareholding".
Section 13 of the Electronic Communications Act of 2005 relates to the transfer of individual licences or change of ownership and states that "an individual licence may not be assigned, ceded or transferred to any other person without the prior written permission of the authority".
It also says the authority may set a limit on, or restrict, the ownership or control of an individual licence, in order to promote the ownership and control of electronic communications services by historically disadvantaged groups, or promote competition in the ICT sector.
"The authority is engaging Cell C to seek clarity on this apparent non-compliance with the legislative provisions. In addition, the authority is also taking external legal advice on the matter, including on appropriate enforcement actions it can take to ensure compliance," ICASA says.
Cell C and Blue Label Telecoms on 7 August announced the recapitalisation had been fully implemented and that Blue Label, through its subsidiary The Prepaid Company, officially owned 45% of the issued share capital of Cell C after investing R5.5 billion. Net1 UEPS also invested R2 billion for a 15% stake. The planned recapitalisation of Cell C has been on the cards since December 2015, when Blue Label originally said it would invest R4 billion for a 35% stake.
Cell C disagrees
Cell C issued a response this morning saying it is "in the process of submitting extensive information to ICASA" and is "unclear" why ICASA has reached the conclusion that the transaction ought to have been filed as an application for change of control of the licensee "without first having heard Cell C's position".
"Cell C has received extensive legal advice and is comfortable the recapitalisation does not amount to a transfer of control that would have required approval. The company is of the view that once ICASA, or whomever ultimately considers the transaction, has a proper understanding of it (which Cell C is at pains to provide), it will be clear there has not been any transfer of control and that no approval is required," the mobile operator adds.
Cell C also notes ICASA has indicated this is its "preliminary view" and it has not as yet given the company any indication - despite repeated requests from Cell C - why it has taken this view or what process it is following.
"It is therefore difficult for Cell C to engage with ICASA's views. Notwithstanding this, Cell C will submit detailed and extensive information to ICASA and welcomes the opportunity to engage further regarding this transaction that has ensured the survival of the company as a sustainable competitor in the sector, increased ownership by historically disadvantaged individuals and saved many thousands of jobs," Cell C adds.
Blue Label declined to comment on the matter, saying it stood with Cell C in its reply.
BEE battle
Cell C's BEE partner, CellSAf, last week raised its own concerns over the deal, claiming it does not comply with various provisions of the Companies Act, the ECA or the Competition Act and "faces a number of legal and regulatory hurdles".
"The sponsors of the transaction have not complied with the mandated regulatory processes relating to changes in control of a licence, and they are therefore in breach of the specific requirements, regulated by ICASA," CellSAf said.
Previously, Cell C was 100% owned by 3C Telecommunications of which CellSAf owned 25%. The remaining 75% was effectively owned by Saudi Oger (with 60% held by Oger Telecom South Africa, a division of Saudi Oger, and 15% by Lanun Securities SA, a subsidiary of Saudi Oger).
After the recapitalisation, 3C Telecommunications' shareholding would be reduced to 30% - in turn held as 29.4% by the Employee Believe Trust, 45.6% by Oger Telecom and 25% by CellSAf. This means CellSAf's overall shareholding in Cell C has been reduced from 25% to just 7.5%.
CellSAf had a number of other issues with the deal and said it launched a High Court application to have the resolutions and agreements set aside.
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