Blu Label’s plan to list mobile operator Cell C on the JSE by November 27 could be derailed by a legal challenge by CellSaf in a seemingly unrelated matter involving setting aside the transfer of licences.
CellSaf is a former broad-based BEE partner to Cell C.
The listing, announced on November 5, involves an offering of existing shares in Cell C Holdings by The Prepaid Company (TPC), a wholly owned subsidiary of Blu Label.
The legal spat has the potential to turn what should have been an easy JSE debut into a test case of Cell C’s hard-won corporate housekeeping. Parent company Blu Label has recast Cell C into a R12bn equity prize, saying its roaming model is a sensible, capital-light adaptation that buys network reach without the debt of a tower buildout and enables partnerships that widen distribution.
The private placement to qualified investors is contingent on market conditions and JSE approval.
In preparation for the listing, TPC is consolidating its control. It is acquiring the stakes of Nedbank (7.53%) and Lesaka (5.13%) in Cell C and has taken on Nedbank’s debt claims against the mobile operator. These claims will be converted into equity, resulting in a R1.3bn reduction in Cell C’s debt to R2.75bn.
However, this process has been complicated by CellSaf, which filed a case in the South Gauteng High Court on October 20. The application, against respondents including the Independent Communications Authority of South Africa (Icasa), Cell C, TPC, and Blu Label, seeks a review and setting aside of Icasa’s approval for the transfer of Cell C’s licences to TPC.
In court papers, CellSaf argues that Icasa’s decision was “tainted by an error of law” because it misconstrued the test for control. The BEE company contends that Icasa ignored and gave insufficient weight to the representations made to it. CellSaf also argues that Icasa failed to consider relevant facts regarding the control of Cell C’s licences.
When contacted for comment on the impending listing, Khothatso Moloi, a director and shareholder of CellSaf, said the company would not comment as “CellSaf and Cell C are in discussions”.
Moloi declined to comment further on what the talks entail or whether the talks are about Cell C seeking to pay the BEE partner to stop the case. This will enable Cell C to continue with its listing.
This is not the first dispute between the parties. CellSaf, which once held a 40% stake in Cell C, has seen its direct stake plummet to zero without receiving payment from acquiring partners. This is due to two recapitalisation transactions by Blu Label of Cell C — one in 2017 and the other in 2022 — diluting CellSaf’s shareholding in the mobile phone operator.
The BEE group has previously accused Blu Label of hijacking Cell C.
In 2017, CellSaf, then led by Zwelakhe Mankazana, lodged a complaint with the Competition Commission, accusing Blu Label and JSE-listed Net1 (now Lesaka Technologies) of orchestrating a takeover bid for Cell C.
CellSaf, which has been vigorously opposing the transfer of Cell C’s control for years, has been arguing that Icasa and the Competition Commission allowed the strategic merger and transfer to take place without scrutiny.
Before the takeover by Blu Label, Cell C was 100% owned by 3C Telecommunications, which in turn was 60% owned by Oger Telecom, a division of Saudi Oger; 25% owned by CellSaf and 15% by Lanun Securities SA, which was a subsidiary of Saudi Oger.
CellSaf has also been critical of Cell C’s empowerment strategy, stating, “Actual empowerment appears to have been replaced with fancy, complicated, sophisticated BEE structures.”
Lethiwe Hlatshwayo, Cell C’s managing executive of corporate affairs, said the company was aware of the CellSaf application, which had not yet been served on it.
“The case has been disclosed in our pre-listing statement. The CellSaf application does not deal with and will not [affect] the listing of Cell C. The listing will proceed in the ordinary course.”
In its pre-listing statement, Cell C acknowledged the judicial review proceedings initiated by CellSaf.
The company stated, “It is too early to provide any guidance regarding the likely outcome or impact of this review application.”
It added, “While an adverse order might set aside Icasa’s approval of the transfer of control, it should not affect the underlying licences held by Cell C.
“In any event, it is expected that, [after] admission, Cell C will no longer be a subsidiary of TPC, which will no longer have a controlling interest in Cell C.”
