Secrecy surrounds Cell C license control transfer

Jorge Mendes

Cell C asked ICASA permission to transfer control of its communications and spectrum licences to Blue Label’s The Prepaid Company. However, it is not clear what is behind this move.

The Independent Communications Authority of South Africa (ICASA) published Cell C’s application in a government gazette on Wednesday, 6 December 2023.

ICASA said it had received applications from Cell C Limited to transfer control of the licences below.

  • Individual Electronic Communications Service (I-ECS)
  • Individual Electronic Communications Network Service (I-ECNS)
  • Radio Frequency Spectrum (RFS) licences
  • The radio frequency spectrum (RFS) licences include licenses for its 2,100 MHz, 900 MHz, and 1,800 MHz spectrum.

Cell C did not give reasons why it would like to transfer these valuable assets to Blue Label’s TPC.

The move surprised many industry players, including some of Cell C’s commercial partners.

Without good reasons for the decision to transfer control, some experts speculated that Blue Label wanted to gain control over Cell C’s most valuable asset – its spectrum.

Cell C did not want to comment on whether Blue Label was concerned about Cell C going bankrupt and was, therefore, preparing for this possibility.

Instead, it said there are regulatory requirements that TPC must fulfil to increase its shareholding in Cell C.

TPC is increasing its shareholding in Cell C by an additional 4.04% to move from a non-controlling holding of 49.5% to a controlling share of 53.5%.

“This entails a filing with the Competition Commission and ICASA for the approval of the transfer of control,” Cell C said.

“This application is a fulfilment of a governance process necessary in the regulatory framework,” it added.

However, when asked which government processes in the regulatory framework it was referring to, Cell C could not answer.

ICT legal and regulatory expert Lisa Thornton told Daily Investor that no rule or regulation requires that licences must be transferred with a change in shareholding.

However, before the licences are transferred or any change of control is made, prior ICASA approval is necessary.

She highlighted that Cell C applied to ICASA to approve a transfer of control of the licenses and not a transfer of the licences themselves.

“If the transaction is approved, Cell C will still own the licenses. However, the control of the licensee, Cell C, will pass to The Prepaid Company,” she explained.

Cell C’s explanation, therefore, does not fully explain why it wants to transfer control of its most valuable assets to TPC.

The uncertainty has caused concerns among many of Cell C’s commercial partners, to whom the mobile operator owes large amounts.

One telecommunication chief executive, who spoke to Daily Investor off the record, said he believes Blue Label is after Cell C’s spectrum.

A recent analysis by Daily Investor analyst Drikus Greyling put the value of Cell C’s spectrum between R3.8 billion and R6.2 billion.

To put the spectrum value in perspective, it is significantly higher than Blue Label’s current market cap of R3.5 billion.

Therefore, it makes sense for Blue Label to gain control of Cell C’s spectrum and safeguard this asset should the mobile operator face liquidation.

Daily Investor asked Cell C for feedback regarding the issue, but the company preferred not to comment.