Picture: ISTOCK
Picture: ISTOCK

Cell C is seeking to cut its debt by 73% as part of a deal that will help SA’s third-largest cellphone operator sell a stake to Blue Label Telecoms while retaining its operating licence, according to two people familiar with the matter.

Under the proposed transaction, Cell C would split about R9bn of borrowings into three special purpose vehicles (SPVs), said the people, who asked not to be identified because the talks were private.

Alongside stake sales to Blue Label and payment services provider Net1 UEPS Technologies, the plan would cut the overall debt to R6bn from about R22bn, they said.

The special purpose vehicles would take on debt held by Nedbank Group, a group of Chinese lenders and a €400m bond issued by Cell C that matured in July 2018, the people said. In exchange, the vehicles would control a combined 30% stake in Cell C.

The proposal is the latest attempt by Cell C to push through the sale of a 45% shareholding to Blue Label for R5.5bn, a deal agreed in October after almost a year of talks. It was being cast as a debt refinancing rather than a takeover as local regulators may demand a licence reapplication in the event of a change of ownership, the people said.

CellSAf, which is black controlled and owns 25% of Cell C, argues that such a transaction would unfairly dilute its shareholding and goes against black economic empowerment initiatives.

Ownership structure

One of the special purpose vehicles will be held by CellSAf, according to the proposal. However, the shareholder had not been officially informed and had not authorised the creation of any SPVs to hold shares in Cell C, one of the people said.

Another special purpose vehicle will be controlled by 3C, the Oger Telecom-controlled entity that previously controlled Cell C and wants to exit the company. An employee ownership scheme will own the third, according to the terms of the proposal.

"We have not announced any detail regarding the SPV structure," Michael Campbell, Blue Label’s head of investor relations, said in an e-mailed response to questions. "Further particulars will be included in the circular to be released later in June."

Cell C declined to comment.

Some of the Cell C debt would be owed by the special purpose vehicles and would be secured by shares in Cell-C, the Net1 board said in e-mailed response to questions, without providing further details.

Under the new terms of the transaction, Net1 will take a 15% stake in Cell C in exchange for taking over R2bn of debt. Other major Cell C shareholders will include the company’s management, led by CEO Jose Dos Santos, according to a circular sent to Blue Label shareholders.

The CEO did not respond to phone calls seeking comment.

In February, Cell C rejected an attempt by Telkom to gatecrash the talks with a $1bn offer.

A Nedbank spokesperson declined to comment. A phone call to Oger’s head office was not answered.


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