Blue Label is hollowing out Cell C
Cell C has claimed that it must transfer control of its radio frequency spectrum licences to its largest shareholder to comply with regulations — but won’t state which rules it is complying with.
News that the troubled mobile operator had applied to cede control of its crown jewels to its shareholder emerged last week when the Independent Communications Authority of South Africa (Icasa) gave notice of it via Government Gazette.
According to the notice, Cell C has applied to transfer control of its Individual Electronic Communications Service (I-ECS), Individual Electronic Communications Network Service (I-ECNS), and spectrum licences to The Prepaid Company.
The Prepaid Company (TPC) is a subsidiary of Blue Label Telecoms and Cell C’s largest shareholder.
Cell C explained that TPC was increasing its non-controlling 49.5% shareholding to a majority stake of 53.5%, which triggers certain governance requirements.
“This entails a filing with the Competition Commission and Icasa for the approval of the transfer of control to enable TPC to obtain majority control of shares of Cell C by obtaining an additional 4.04% shareholding,” it stated.
“This application is a fulfilment of a governance process necessary in the regulatory framework, which will be publicly announced as soon as the Competition Commission and Icasa have approved the application for transfer of control of the business.”
MyBroadband asked Cell C about other network providers in South Africa that have retained control of their spectrum and operating licences despite being majority-owned by another company.
When asked to point to specific regulations that require Cell C to transfer control of its licences to TPC, the mobile operator simply referenced whole sections of the Electronic Communications Act.
“The regulations that guide the process are contained in Section 13 and Section 31 of the [Act],” Cell C told MyBroadband.
However, these sections contain no stipulations about licensees needing to transfer control of their I-ECNS, I-ECS, or spectrum licences to a majority shareholder.
An I-ECNS licence permits companies to sell wholesale access to physical network infrastructure.
I-ECS licences let companies like Cell C sell telecommunications services directly to end-users.
The spectrum licences Cell C applied to be transferred are its 2100MHz, 900MHz, and 1800MHz assignments. This is all of Cell C’s premium raw wireless network capacity.
An analysis by Daily Investor earlier this year found that Cell C’s spectrum is worth between R3.8 billion and R6.2 billion.
Cell C is also hopelessly insolvent, with its negative equity at the end of 2022 at R9.3 billion.
This raises the question — what happens if Cell C gets liquidated after transferring control of its spectrum licence to TPC?
Will Blue Label get to keep control of this valuable asset, or will it go into Cell C’s estate for creditors to try and recoup their money?
Cell C dismissed this question as “hypothetical” and declined to answer.
Blue Label did not respond to requests for comment.
Pictured: Blue Label co-CEOs Brett and Mark Levy.
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