Blue Label Telecoms has described claims made by disgruntled Cell C shareholder CellSAf in a media statement on Wednesday as “factually incorrect in all respects”. Cell C has called CellSAf’s statement “yet another in a long list of baseless accusations”.
In the statement, CellSAf said recent hearings by communications regulator Icasa “revealed potentially fatal flaws, if not possible regulatory breaches”, by new Cell C shareholders Blue Label and Net1 UEPS Technologies.
“Cell C sold its recapitalisation as necessary for the business and good for empowerment and for its staff. It has attempted to sail through the regulatory process by maintaining that the deal did not result in a change of ownership and that regulators therefore weren’t required to ask questions about empowerment,” CellSAf said.
However, it claimed Cell C chief legal officer Graham Mackinnon “admitted” at the hearings that “the Competition Commission’s current view is that there has been an acquisition of control in Cell C by Blue Label Telecoms”, which, it said, could lead to regulatory sanctions being imposed. Blue Label acquired 45% of Cell C for R5.5bn in 2017 as part of the recapitalisation programme.
“Mackinnon also claimed that the debt of over R2.5bn incurred by the staff of Cell C, for an 8.82% stake in the company, acquired through a purchase from the exiting and now bankrupt former controlling shareholder Oger Telecom, would be repaid as a result of the company ‘performing, hopefully, well enough that all shareholders receive a return”.
“The recapitalisation has had the opposite effect to these claims and the company’s poor performance in the nine months since it concluded the recapitalisation has led to a further downgrade by ratings agency Standard & Poor’s, which both Cell C and Blue Label have kept mum about.”
It said Blue Label and Cell C could face sanctions from stock exchanges, investors and other regulators “for failing to disclose these critical regulatory and ratings developments”.
But Blue Label hit back on Wednesday, accusing CellSAf of making inaccurate statements. “Graham McKinnon,” it said, “has denied making the statements alleged by CellSAf. The competition authorities have not made a finding that the recap deal requires their consent.”
Cell C, meanwhile, described the accusations as “baseless”.
“In its latest attempt to discredit Cell C, CellSAf has misquoted Cell C’s submission and oral representations to Icasa in response to the regulator’s plans to promote broad-based black economic empowerment and ownership in the ICT sector in general that had absolutely nothing to do with CellSAf,” the operator said.
‘Distorted meaning’
“Cell C’s presentation was exceptionally positive and well-received by the regulator. It is astounding that CellSAf is now ascribing its own distorted meaning to Cell C’s presentation on this matter.”
The company said CellSAf’s claims “are in keeping with the litany of untruths and distortions that it has made over the years and its continued attempts to discredit Cell C”.
“It is clear that CellSAf is not confident in its case, which it has lodged in court, as it continues to air its unfounded grievances in the media, rather than allowing the legal process to run its course.”
On S&P’s decision to downgrade Cell C’s debt, CellSAf claimed the mobile operator “is not performing as well as Blue Label and Net1 had expected it to or are telling the markets it is”.
In response to the downgrade, Cell C said it is not linked to the performance of the company. “The S&P statement regarding the downgrade — which was made public on 7 May — in fact acknowledged the positive performance of Cell C.”
It said it has been only 10 months since the recapitalisation and “since then the performance of the company has been in line with expectations set by management and shareholders.”
“Potential funders have indicated they would only consider engaging with Cell C following their analysis of its 2017 annual results, which were only announced in February,” Cell C said. “We believe the expectation by S&P on Cell C to secure financing facilities in such a short time frame following the recapitalisation was unrealistic.
“Notwithstanding this, Cell C has made significant progress and has put measures in place to ensure the stability and sustainability of the business. The company is also well advanced in arranging long-term facilities to refinance existing debt and raising new capex financing for utilisation in the next 24 months. These debt facilities will improve Cell C’s capital structure, debt maturity profile and funding mix and will fundamentally address liquidity concerns ahead of its intended listing in the medium to long term.”
Cell C has in the interim secured shorter-term financing facilities to manage liquidity while the company concludes the new debt package, it said.
“The downgrade in no way affects the existing capital structure of Cell C, which remains in place,” it added.
In another development, Blue Label said on Wednesday that it will hold a conference call with shareholders and analysts at 5pm on Thursday, after markets in Johannesburg close, to “deal with requests for further information about elements of Cell C’s historic financial disclosure”. It did not elaborate. — © 2018 NewsCentral Media