How Cell C’s employees will benefit from new share deal

A proposed restructuring of Cell C was recently approved by the boards of Cell C and 3C Telecommunications, which will see Cell C management and staff own 30% of the company.

As part of the deal, Blue Label Telecoms will buy a 35% stake in Cell C for R4 billion, while its current shareholder 3C Telecommunications will also put money into the company to reduce debt.

Cell C management and staff will hold around 30% of the total issued share capital in Cell C at a cost of R2.5 billion – a discount of around 25% on the market value of the company.

Cell C CEO Jose dos Santos said the staff share scheme has resulted in motivated employees and management teams.

Speaking to Bruce Whitfield on CNBC’s MoneyMakers, dos Santos said they have made good progress in raising the R2.5 billion needed for the staff scheme.

He said that after the effective date of Cell C’s restructuring of 1 June 2016, the shares will be held in a trust and managed on behalf of Cell C employees.

“We have created a special dividend policy within the organisation and with our shareholders, which will service that debt of the R2.5 billion,” said dos Santos.

All staff are participating in the scheme, and conditions have been put in place to keep employees and management at the company for the next few years.

Dos Santos said they plan to list Cell C on the JSE in around 4 years, after which staff will be able to sell 30% of their shares.

After the JSE listing, staff may sell the remainder of their shares over the next 4 to 5 years.

Cell C can create great value

Dos Santos said the recapitalisation deal will see Cell C reduce its debt to R6 billion, and that all debt will be in rand.

He said this is an improvement over the company’s previous financial position, where its debt was “in the high double-digit figures, and all in foreign currency”.

Dos Santos said Cell C is showing strong growth, and has a good financial position if its debt is taken out of the picture.

“We have a very healthy EBITDA (earnings before interest, tax, depreciation and amortization), and our EBITDA margin looks very good,” he said.

He said the lower debt will result in the company not needing any further capital injections, and allow them to focus on growing the business.

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How Cell C’s employees will benefit from new share deal