Cell C still owes R288 million for spectrum — Communications department

Cell C must still pay R288.2 million for the spectrum it acquired in an auction held a year and a half ago, Business Times reports.

Several unnamed sources told the publication that Cell C had failed to pay for its new spectrum allocation, prompting Business Times to contact the Department of Communications and Digital Technologies.

It had received no feedback from the Independent Communications Authority of South Africa (Icasa) or Cell C.

Director-general Nonkqubela Jordan-Dyani told Business Times her department had “heard” that the mobile network operator had not yet paid for the spectrum.

“From a department perspective, Cell C has not approached us… That’s why I said we ‘heard’ [it has not paid],” Jordan-Dyani said. “Because they haven’t approached us, we wouldn’t know the nitty-gritty of what is happening there.”

According to the report, insiders believe Cell C will likely lose its newly acquired spectrum due to its failure to pay timeously.

The company secured 10MHz in the 3,500MHz band in Icasa’s high-demand spectrum auction, which ran from 10 to 17 March 2022.

It made the smallest financial commitment of any of the major mobile networks, with its closest rivals Telkom and Rain committing R2.11 billion and R1.43 billion, respectively.

The largest sums bid on the auction came from Vodacom — R5.38 billion — followed by MTN with R5.15 billion.

Following the spectrum auction, Vodacom said it would have to pay its committed amount within 30 days after Icasa awarded it.

This excluded spectrum still in use by television broadcasters.

The spectrum Cell C bid on was not being used by analogue TV broadcasts and was available for it to use.

The auctioned spectrum is being used to improve 4G and 5G networks in South Africa.

The licencing costs were supposed to add over R14.47 billion to the country’s fiscus, but Cell C’s alleged failure to pay puts the number below R14.2 billion.

The table below summarises how much spectrum each telecoms company secured during the high-demand spectrum auction held by Icasa in March 2022.

Total spectrum lots acquired per bidder and associated financial commitment
Bidder 700 800 2600 3500 TOTAL (ZAR)
Telkom 20 22 R2,113,615,407.10
Liquid Telecom 4 R111,000,000.00
Cell C 10 R288,200,000.00
Rain 20 20 R1,431,374,105.50
MTN 20 40 40 R5,152,100,000.00
Vodacom 20 80 10 R5,381,600,000.00
Unsold 20
Total Revenue Generated R14,477,889,512.60

Cell’s C comparatively minor commitment came amid deep financial distress — with billions in debt and repeated annual losses over the past few years.

In its most recent annual financial results, Cell C recorded a R2.3 billion loss for the year ended 31 May 2023.

While parent company Blue Label Telecoms’ statements initially showed it had swung from a R2.4 billion loss to a R4.9 billion profit, this included extraneous income of R6.9 billion.

This income could be attributed to cutting 80% of the debt it owed to some of its secured lenders, bolstering Cell C’s income statement.

In addition to the debt reduction, the operator slashed costs by decommissioning its physical radio access network (RAN) infrastructure and moving to a virtual RAN managed by MTN.

The downsizing of its business has led to Cell C losing the position of third-biggest mobile operator to Telkom.

Since the Blue Label Group first acquired a 45% stake in Cell C in August 2017, its share price has plunged by 80%, with the uncertainty surrounding the mobile operator causing most of the drag.

Nevertheless, the company recently said it had agreed to acquire control of Cell C by increasing its shareholding from 49.53%.

Blue Label has punted Cell C’s spectrum as one of several features contributing to the operator’s value.

A recent analysis by Daily Investor determined that Cell C’s total licenced spectrum of 94MHz was valued between R3.8 billion and R6.2 billion, while Analysys Mason previously valued it at R10 billion.

Now read: Telkom appoints outgoing Transnet finance boss as new CFO

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Cell C still owes R288 million for spectrum — Communications department