Blue Label Telecoms is still awaiting Competition Tribunal approval for its plan to take voting control of Cell C, but that hasn’t stopped it from increasing its economic interest in the mobile operator by a further 10 percentage points.
Alongside its interim financial results for the six months to end-November 2024, published on Thursday, JSE-listed Blue Label revealed the increased economic interest in the business.
In 2022, Cell C transferred its debt to a new entity called SPV5 in exchange for the latter owning 10% of Cell C. Blue Label guaranteed the debt repayment, and another company, The Prepaid Company, a Blue Label subsidiary that holds the group’s stake in Cell C, agreed to provide R275-million to SPV5 to help pay off the debt. The debt will be settled in tranches between December 2024 and December 2026.
“Blue Label issued a guarantee in favour of the lessor for the repayment of this debt, while TPC committed to providing R275-million in funding to SPV5 in exchange for a claim of R699-million in SPV5, enabling it to meet its repayment obligations,” Blue Label said.
On 31 December 2024, TPC advanced the first tranche of funding – an amount of R100-million. The remaining funding commitments are scheduled as follows:
- R100-million on 31 December 2025;
- R50 million on 31 December 2026; and
- An additional R25-million on 31 December 2026, contingent upon the occurrence of certain liquidity events.
“SPV5 is required to repay TPC for the amounts advanced from any future sale of shares and/or from dividends earned thereon, along with an additional R424-million plus 50% of the fair value of its 10% shareholding in Cell C, to the extent that the proceeds exceed R699-million,” Blue Label said.
“Since SPV5’s only asset is its shareholding in Cell C, the repayment will be dependent on the disposal of these shares or dividends earned thereon. As a result, as of 31 December 2024, TPC has effectively acquired an additional 10% economic interest in Cell C, capped at the repayment amount. This investment will be equity accounted, subject to the cap, alongside TPC’s existing 63.19% economic interest in Cell C.”
Regulatory approvals
In December, TPC borrowed R311-million from Rand Merchant Bank, scheduled to mature at the end of this month, at an interest rate of prime plus 1%.
“TPC is in the final stages of securing an extension prior to the maturity date, which will extend the facility for an additional 18 months, with repayments in equal monthly instalments commencing on 31 March 2025.”
Blue Label, through TPC, holds 49.5% of the voting rights in Cell C and can appoint four of its 12 directors, where each director has one vote. Blue Label in January received the green light from communications regulator Icasa to take control of Cell C.
Read: Blue Label is not ‘stripping’ Cell C’s assets, Icasa hears
However, the parties have been waiting 10 months — and counting — for the Competition Tribunal to give its go-ahead — or not — for the deal to proceed. The Competition Commission recommended last April already that the transaction be approved.
The tribunal recently defended itself against criticism that it is taking too long to probe mergers and acquisitions in the ICT sector. In response to questions from TechCentral, it said: “The tribunal is enjoined to conduct its hearings in accordance with the principles of natural justice, which means affording all the parties an opportunity to access the record, to request discovery of documents, to file their papers including filing factual witness statements and economic expert witness statements, before hearing the matter. These processes take time and are in the nature of legal proceedings.”
“It bears mention that in the year to date (April-December 2024), 99% of mergers filed with the tribunal were heard within the required time frames. In the financial period 2023/2024, the tribunal heard 94% of mergers within the stipulated time frames,” it said.
The tribunal said that in the Cell C case, it had to schedule in intervention applications by MTN, Vodacom, Pepkor (a retail group) and CellSAf (a Cell C shareholder). The applications were heard by the tribunal in July and August 2024, with all but Vodacom’s application being granted. The tribunal said this takes time.
“For each matter, a timetable is set that makes provision for interested third parties who wish to intervene, to do so; other interlocutory matters raised by parties and discovery processes; the filing of factual and expert witness statements; and hearing dates. Hearing dates depend, inter alia, on the availability of all parties and their legal representatives and economic experts,” it said. – © 2025 NewsCentral Media
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