Blue Label’s share price fell 2.4% to close at R18.49 on Thursday as the company’s equity deal with Cell C came under regulatory scrutiny.
The Independent Communications Authority of SA (Icasa) is seeking legal advice on the deal, which Cell C has filed as a notification of change of ownership.
Icasa said its preliminary view was that the deal ought to have been filed as an application for change of control.
If the deal is filed as such, it is likely to be opened for public comment. This may further delay the conclusion of the deal that has been on the cards for about two years.
Blue Label and Net1 have bought 45% and 15% stakes in Cell C, respectively in a move aimed at saving the ailing mobile network operator.
Icasa said it was still in talks with Cell C about the “apparent noncompliance with the legislative provisions”.
But Cell C said it had received extensive legal advice and was “comfortable” that the recapitalisation did not amount to a transfer of control that required approval.
Telecoms analyst and World Wide Worx MD Arthur Goldstuck said that on the face of it, it was surprising that Icasa was not approached earlier for input on the deal. “It is clear that a change in ownership has occurred, and Cell C and Blue Label are going to have to explain why they believe this does not trigger section 13 of the ECA [Electronic Communications Act that deals with a change of control],” he said.
Africa Analysis MD Dobek Pater said it was “somewhat puzzling” that Icasa would raise this issue effectively after the conclusion of a protracted recapitalisation transaction.
Whether there had been a change of control was debatable, as none of the new shareholders held an absolute majority or had a controlling interest “although there has been speculation that close co-operation between Blue Label and Net1 may result in de facto control of Cell C”.