Cell C’s Johannesburg headquarters. (Photograph by Lesley Moyo)
Cell C’s precarious financial position came under the spotlight this morning, when the Competition Commission argued before the Competition Tribunal.
At a hearing, the commission argued that the plan for Blue Label Telecoms to acquire control of the operator would effectively throw the country’s fourth-largest mobile network operator a lifeline.
Representing the commission, Themba Mahlangu said the transaction would give Cell C “another chance at life”, noting this was the broader context in which the commission had approved the deal.
“It’s in the public domain that the MNO [mobile network operator] isn’t doing well financially, and that if, given these benefits that may flow from this transaction, perhaps it’s given another chance at life,” Mahlangu told the tribunal.
Blue Label, which currently holds a 49.5% non-controlling stake in Cell C, is seeking to acquire an additional 4.04% through its subsidiary, The Prepaid Company (TPC), giving it control of the operator.
Mahlangu noted that additional conditions agreed to shortly before the hearings addressed outstanding concerns, particularly after the merging parties struck separate agreements with MTN and Pepkor/Flash.
The commission had approved the transaction in April last year, saying it “does not raise public interest concerns”.
However, Pepkor/Flash raised fresh objections during the hearing, arguing its ability to sell Cell C airtime could be compromised if TPC benefited from preferential pricing based on sales volumes that only it could realistically achieve.
Pepkor/Flash argued that a three-year moratorium on preferential pricing was insufficient and pushed for a five-year term, noting that even this might not fully safeguard its position but would offer “some comfort”.
Attorney Paul Cleland, representing the merging parties, countered that the existing conditions already prevent preferential treatment for TPC. He added that any extreme discounting would only happen if Cell C faced severe financial distress, as had occurred previously when the operator required an urgent cash injection.
Cleland noted that the maximum moratorium on favourable deals not extended to other parties was five years.
MTN, represented by advocate Robin Pearse, confirmed its concerns had been resolved ahead of the hearings and that it no longer opposed the transaction. MTN’s initial objections centred on Cell C’s potential access to its airtime sales data and fears that the merging parties could dominate airtime sales, stifling competition.
The tribunal’s approval is one of the final hurdles for the deal, following the Independent Communications Authority of South Africa’s (ICASA’s) decision to approve the transfer of control of Cell C’s licences to Blue Label.
Cell C will continue to operate as a mobile network operator, retaining full control of its spectrum and providing uninterrupted services to its customers. Blue Label has said it will settle Cell C’s R175 million in debt by the end of next year and that it may list Cell C on the JSE.
Blue Label has explained that, although the licences remain in Cell C’s name, ICASA’s approval was required because a change of control occurs when TPC’s shareholding exceeds 50% of Cell C’s issued share capital.
