Stronger Cell C is bad news for MTN

Things are looking up for Cell C after its board, and the boards of Blue Label Telecoms and 3C Telecommunications approved the deal to recapitalise the operator.

This is according to a report in the Sunday Times, which quoted a director at Africa Analysis, Dobek Pater.

Pater said that if Cell C found itself stronger in 2–3 quarters, it would put MTN on the back foot in South Africa.

“MTN is probably not in great shape… They have previously suffered on account of Cell C’s aggressive growth in terms of subscribers,” Pater said.

Ratings agencies have also had their say, with Moody’s cutting MTN’s rating just before Christmas, while giving it a negative outlook due to the uncertainty over the massive fine it faces in Nigeria.

Cell C, on the other hand, has received some good news from one of the big 3, with Standard & Poor’s putting it on a positive outlook after the recapitalisation deal was announced.

Under the terms of the deal, Blue Label will pay R4-billion for around 35% of Cell C’s shares. Cell C management and staff will pay R2.5-billion for 30% of the shares. 3C Communications will hold onto the remaining 35%.

Crucially, Cell C will also be able to cut its debt to R8-billion or less, and refinance it in South African rand.

The deal is set to go ahead on 1 June 2016, pending definitive transaction agreements and receiving the relevant regulatory approvals.

Read the full report in the Sunday Times (3 January 2016).

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Stronger Cell C is bad news for MTN