Cell C explains why it must transfer its spectrum and network licences to TPC

[Jan]

Cell C explains why it must transfer control of its crown jewels to its biggest shareholder

Cell C has explained that it is transferring control of its network operating licences and radio frequency spectrum to its largest shareholder to comply with regulations.

“As part of the governance process already initiated by The Prepaid Company (TPC) to increase its shareholding in Cell C, there are regulatory requirements that TPC must fulfil,” Cell C told MyBroadband in a statement.

 

[Jet-Fighter7700]

why does Cell C even exist then, aren't they insolvent?
or is this some tactic to not scare investors too much.

 

[nicroets]

why does Cell C even exist then, aren't they insolvent?
or is this some tactic to not scare investors too much.

Just technically insolvent: That means their liabilities exceed their assets when measured using a certain accounting standard. That accounting standard may not properly recognize customer value and other assets like spectrum.

 

[Jet-Fighter7700]

Just technically insolvent: That means their liabilities exceed their assets when measured using a certain accounting standard. That accounting standard may not properly recognize customer value and assets like spectrum.

sounds like an Enron explanation to me, but maybe Cell C is too big to fail.

 

[nicroets]

sounds like an Enron explanation to me, but maybe Cell C is too big to fail.

I believe that Coca cola was in a similar situation for many decades: Accountants valued the brand at practically zero. Banks valued the brand highly, lent money to coca cola, which was paid out to shareholders as dividends. Then they were technically insolvent.

Those loans are then serviced and paid back over subsequent decades from all the cash that the core business generates.

Customers of Cell C can have piece of mind that Blue Label Telecom is basically going in 100% on Cell C. And BLU is listed on the JSE.

 

[juanthyme]

An I-ECNS licence permits companies to build, operate, and sell wholesale access to physical network infrastructure.

to be accurate

An I-ECNS licence permits companies to build, operate, and sell wholesale access to physical network infrastructure.

 

[midasza]

I believe that Coca cola was in a similar situation for many decades: Accountants valued the brand at practically zero. Banks valued the brand highly, lent money to coca cola, which was paid out to shareholders as dividends. Then they were technically insolvent.

Those loans are then serviced and paid back over subsequent decades from all the cash that the core business generates.

Customers of Cell C can have piece of mind that Blue Label Telecom is basically going in 100% on Cell C. And BLU is listed on the JSE.

In fairness I feel there are not as many parallels as you may think here.

Cell C brand is virtually worthless
Their spectrum is all licensed out to MTN and Vodacom contractually and so can't be sold/used for other purposes
Their liabilities even after their last capitalisation round is around 9 billion rand and at this point they have sold off everything that reasonably has value except spectrum.
Their subscriber base is dropping.
Their profits are also dropping due to the fact that it costs more to have Vodacom and MTN run your network and bill you for it (same as it costs more to have a gardener do your garden instead of you, the water, fertiliser, spade, pruning shears all cost the same but the gardner needs to be paid).
Their product isn't very good. Its not cheaper than other MVNO's and it doesn't provide better better call quality or LTE/5G than MTN/Vodacom, so they either compete with MTN/Vodacom and get billed for it extra, or they compete with Axxess and PepCell on cost.

Compare that to Coca-Cola
Their brand is worth lots.
Their product is well liked by many people.
They can easily change their prices as input costs go up.


I predict for 2024 that there will be a news article claiming one or all of the following:

Cell C asks creditors to take a haircut on their debt offering Xc per rand.
Cell C announce massive staff redundancies
Cell C moves towards online only store model.
TPC offers Spectrum to XXX player for XX Billion of rands investment, claims as it no longer runs towers asset is underutilised and they can unlock more shareholder value if they sell it to MTN/Vodacom/Rain/Telkom/ANOther

 

[entrepr]

I'm curious to see the detail on the governance requirements that compel the licence transfer