CompCom approves Cell C takeover by Blue Label’s TPC

The Competition Commission has recommended that the Competition Tribunal approve the proposed acquisition of a controlling stake in Cell C by Blue Label’s The Prepaid Company (TPC). 

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

TPC is a wholly owned subsidiary of Blue Label Telecoms and operates as a wholesale distributor of prepaid telecommunication products, including prepaid airtime, postpaid airtime/contracts, SIM cards, and entry-level handsets. 

The Commission has recommended that the Tribunal approve the merger subject to conditions to mitigate information exchange concerns. 

It also imposed conditions to ensure the continued use of certain prepaid airtime distribution channels for a period post-merger.

At the end of last year, Cell C asked the Independent Communications Authority of South Africa (ICASA) permission to transfer control of its Electronic Communications and spectrum licences to TPC. 

Cell C explained that this was because its major shareholder, TPC, exceeded the 50% shareholding threshold.

The license transfer application sparked industry speculation that TPC is trying to gain control over Cell C’s valuable spectrum licenses.

However, this is not the case. Cell C was required to submit the application to ICASA because TPC will become a majority and controlling shareholder in Cell C.

ICASA published a “Memorandum Regarding Control” on 31 March 2021, which stated a party is deemed to control a licensee if it owns more than 50% of its shares.

As TPC’s shareholding would exceed 50%, Cell C was obliged to apply to ICASA to acquire the additional 4.04% in Cell C.

The licences will continue to be owned by Cell C, and Cell C will continue to provide the licensed services. 

Cell C highlighted that the spectrum licences will not be transferred to any party. Cell C will continue to hold, use, and pay for the spectrum.

The mobile operator added that it will continue to provide the licensed services and to discharge its licence obligations.

“Cell C is undergoing a change of shareholding, which will trigger a change of control of the licensee,” it said.

The company is going through with the licence transfer despite objections from one of Cell C’s oldest shareholders, CellSAf. 

CellSAf told Daily Investor in January that it does not support transferring control of Cell C’s licenses to Blue Label’s TPC.

Director and company secretary of CellSAf, Nomonde Mabuya, said they had not been consulted about the transfer of control and that the application had happened without their knowledge.

“This licence transfer matter was never discussed with us. The first time we learned about it was when we saw the ICASA government gazette published on 6 December 2023,” she said.

What is particularly concerning for CellSAf is that the matter has been kept from them despite their regular engagement with Blue Label Telecoms executive team members.

Mabuya said they had submitted their objection to Cell C’s planned licence control transfer to ICASA through their legal team on 29 December 2023.

She said they are concerned that Blue Label is stripping other shareholders of Cell C’s key strategic assets. This includes the transfer of control of its spectrum license.