MTN South Africa CEO Mteto Nyati has said the mobile operator is “comfortable” with its distribution partnership with JSE-listed Blue Label Telecoms, despite the latter’s plan to acquire a 45% stake in mobile rival Cell C.

Blue Label, which distributes airtime on behalf of all of South Africa’s mobile operators, said this week it is moving ahead with a plan to acquire the Cell C stake in a deal worth R5,5bn.

The acquisition forms part of a recapitalisation of Cell C, which is drowning in debt. Under the plan, Cell C’s debt will be reduced from north of R20bn to less than R6bn, putting the operator in a stronger position to compete with bigger rivals MTN and Vodacom.

The deal has prompted speculation that MTN and Vodacom might walk away from their distribution relationships with Blue Label. Those concerns may be unfounded if MTN’s reaction to the deal is anything to go by.

Nyati, who used to sit on Blue Label’s board when he was MD of Microsoft South Africa — Microsoft used to own a minority stake in Blue Label — said he has deep insight into the business.

“If they sell more Cell C, they will diminish their value proposition,” Nyati said. “We will continue to watch it, but we don’t see an immediate threat. We have, in fact, strengthened our relationship with Blue Label and agreed some aggressive growth targets with them. If they switch and push more Cell C, they won’t earn the commission from us. I’m comfortable with that relationship.”

He said Cell C will remain constrained as a competitor, even after the planned recapitalisation.

“Over the last two years, on capex alone, MTN has spent R20bn to R23bn. If you are any player you need to be spending that kind of money,” he said. “The fact that they (Cell C) have new shareholders does not take away that there are fundamentals that will continue to face that business. There needs to be a level of consolidation in the market, maybe at a network level.”

Earlier this week, Blue Label Telecoms denied its contract with Vodacom to distribute airtime was being cancelled, rubbishing widespread market speculation that the mobile operator had served notice to terminate the agreement.

Co-CEO Brett Levy said the Vodacom deal still had four-and-a-half years to run.

Levy’s brother and co-CEO Mark Levy said it’s “business as usual” with all mobile partners, including Vodacom. Blue Label, he said, was positioned as a “neutral distributor of products and services and people shouldn’t lose sight of that even though we have an agreement in place” with Cell C.