Cell C’s black economic empowerment shareholder, CellSAf, which currently holds 25% of South Africa’s third largest mobile operator, has warned it will head to court this week if a planned restructuring goes ahead, saying it’s being treated unfairly.
In an e-mailed statement on Sunday, CellSAf said that it remains “resolutely opposed” to the recapitalisation plan for Cell C, in terms of which JSE-listed Blue Label Telecoms will acquire 45% of the business for R5,5bn. Other shareholders, including CellSAf, will be diluted in the process.
Cell C and Blue Label Telecoms have until this Tuesday, 28 February to consummate the deal. Complicating matters, it emerged this week that Telkom is talking to Cell C’s lenders about a possible last-minute deal to buy the company.
And now CellSAf, which has previously spoken out strongly against the restructuring, is threatening to do all it can to stop Blue Label transaction from proceeding.
“Should the deal go ahead … CellSAf will seek relief from the courts, along with regulatory bodies including Icasa, the Competition Commission, the department of telecommunications, the CIPC and the JSE,” the e-mail warned.
“The board of Cell C has not consulted with CellSAf, nor has it provided an opportunity for this shareholder to raise concerns related to this transaction with the company’s management and board,” it said.
“In the new financing structure, 3C Telecommunications, 75% owned by Oger Telecom and 25% by CellSAf, is also expected to subscribe for 30% of the shares in its wholly owned subsidiary, Cell C, for an amount of up to R12bn. CellSAf’s indirect shareholding will be reduced to 7,5% for which it will be expected to assume additional liabilities of almost R3bn,” it continued.
It said Cell C was granted its operating licence 16 years ago because of its “broad-based BEE shareholding”.
“We are not going to stand by idly as a handful of rich business people rob millions of South Africans of their investment,” said CellSAf spokeswoman Nomonde Mabuya. “Why should CellSAf be sacrificed for the interests of Blue Label Telecoms and its new shareholder, Net1, a company whose motives we are duty bound to question?”
Mabuya said CellSAf was South Africa’s “first truly broad-based BEE vehicle, one that facilitated millions of ordinary South Africans taking up a stake in the mobile industry”.
“However, CellSAf has not received a cent in dividends to date and has steadily been deprived of any participation in the management and control of the company,” she said.
CellSAf accused Cell C’s board of denying it its “rightful” 25% director representation on the board and of “not working in the best interest of the company and its various other stakeholders, including all its lenders”.
“We believe there have been and remain other options to manage Cell C’s capital structure requirements but those alternatives will not see the light of day while the Cell C board is doing the bidding of just one shareholder, namely [Cell C parent] Oger Telecom,” said CellSAf director Zwelakhe Mankazana in the statement.
“Any intervention to stabilise Cell C should protect the interest of all the shareholders, as well as all the lenders and guarantee genuine empowerment for its shareholders and employees,” Mankazana said. “The 3 000 employees of Cell C need a stable and well-run company, not a placatory employee empowerment deal for which the business knows funding is unlikely to be secured.”
Mankazana claimed that should the employee scheme proposed by Cell C’s board be unable to raise R2bn within 12 months, the 15% stake will revert to Cell C for just R100.
“At the same time, should the deal with Blue Label Telecoms be concluded, six members of senior management, including the CEO, the chief financial officer and the chief legal officer, will be granted a 10% stake in the business at a nominal cost of R2 000.”
Said Mabuya: “The BEE investors that founded Cell C invested US$100m in the company at the time, raised by all its shareholders, who comprise over 30 SMMEs from every province of the country and organisations like Contralesa, the National Movement of Rural Women, Sataco and MKMVA and a host of women owned businesses and investment vehicles. We believed in this company right from the start and now we are meant to quietly hand it all over, in a deal that does nothing more than further enrich the super wealthy.” — © 2017 NewsCentral Media
- Now read: Cell C hits back at BEE partner