Is the Independent Communications Authority of South Africa (Icasa) capable of untangling the complex BEE structure established by Cell C to discover the true ownership of the company and its subsidiaries?
I remain unconvinced.
On September 26, 2023, Cell C applied to Icasa to transfer control of its licences, including its radio frequency spectrum, to The Prepaid Company (TPC). TPC, a subsidiary of JSE-listed Blue Label Telecoms, currently holds a 49.53% stake in Cell C and seeks to increase this to 53.5%. This move, however, is fraught with controversy due to concerns over Cell C’s actual BEE credentials and speculation that MTN may be controlling its spectrum.
At a public hearing held this week by Icasa, issues regarding Cell C’s empowerment status were highlighted, with some questioning whether the company meets the requirement of at least 30% ownership by historically disadvantaged individuals.
Duncan Turner, SC, representing Vodacom, presented evidence suggesting that MTN might have assumed control over Cell C’s spectrum, which would necessitate amendments to the application. Turner argued that, without these changes, the application should either be rejected or suspended.
Cell C’s former BEE partner, CellSaf, has seen its direct stake plummet from 40% to just 1%.
Advocate Siyabonga Mahlangu, representing CellSaf, noted: “We didn’t even know until today that it has been reduced to 1%.”
He criticised Cell C’s approach, saying: “Actual empowerment appears to have been replaced with fancy, complicated, sophisticated BEE structures.” Mahlangu urged Icasa to thoroughly investigate the holding structure of Cell C, as CellSaf’s data suggests the company doesn’t meet the 30% black ownership threshold.
Simply producing a BEE certificate will not suffice in this instance and Icasa must ensure the real owners of these SPVs are revealed
Cell C says it has around 36% black ownership, which will drop to just over 34% if TPC increases its stake.
Despite this, Icasa has not rigorously examined these claims, instead it requested additional written submissions from Cell C — a step that appears insufficient given the complexity of the ownership structure.
I believe the root of the problem lies in the obscure special purpose vehicle (SPV) structures created by TPC and Blue Label.
These SPVs played a crucial role in Cell C’s recapitalisation efforts between 2017 and 2022, absorbing debt obligations in exchange for shares in the company.
However, it remains unclear who controls these SPVs.
This raises significant questions about Cell C’s true ownership.
Cell C CEO Jorge Mendes presented a breakdown of the company’s shareholding, which includes entities such as Lesaka Technologies (5.13%), M5 (1.71%), SPV4 (10.47%), SPV5 (10%), and others. Post-transaction, TPC’s stake would rise to 53.57%.
Yet, beyond TPC, Lesaka Technologies, and Nedbank (7.53%), the identities of other shareholders are shrouded in secrecy.
Particular attention should be given to SPV4, which is owned by Albanta Trading — a subsidiary of the Believe Trust established for the benefit of Cell C employees. Active directors of Albanta include Cell C executives Joseph Juba Angelo Mashaba and Lehlomo Joshua Moela.
There is speculation that SPV4 may serve as a proxy for TPC, which funded the acquisition of these shares.
This lack of transparency extends to other SPVs as well, with Cell C executives such as Brett Dylan Copans and Rachael Ayo-Oladejo being active directors of both SPV4 and SPV5.
Again, it is unclear whether these entities are merely fronts for TPC.
The mystery deepens with M5, an entity for which no registration exists with the Companies and Intellectual Property Commission (CIPC).
However, a 2018 filing with the London Stock Exchange showed that former Cell C executives owned stakes in M5, including ex-CEO Jose Dos Santos (1.875%), former chief strategy officer Robert Pasley (1.25%), group general counsel Graham MacKinnon (1.25%) and executive of informal channel Hilton Coverley (0.625%).
It is unknown whether these individuals still control M5, adding yet another layer of opacity to the overall ownership structure.
These complicated ownership details must be disclosed before Icasa can responsibly approve any transfer of control.
Failure to do so risks enabling a scenario where TPC’s actual stake in Cell C could exceed 80%, which would contravene regulatory principles and undermine the integrity of the BEE framework.
Simply producing a BEE certificate will not suffice in this instance and Icasa must ensure the real owners of these SPVs are revealed. They cannot be paraded as BEE partners.
That said, Blue Label has been a lifeline for Cell C.
Blue Label has injected more than R14.4bn into Cell C, settling creditor claims and providing loans.
While Blue Label or TPC, as an investor, has a legitimate interest in securing Cell C’s future, this cannot come at the cost of transparency.
To thrive, Cell C must operate under clear and honest ownership structures.
Icasa should not approve TPC's application to increase its stake in Cell C without a full and transparent disclosure of the company’s ownership.
If Cell C wants to remain a viable player in South Africa’s telecommunications sector, it must come clean about who owns and controls the company.
Only then can Icasa make an informed decision that serves the best interests of all stakeholders.
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