R44 billion destroyed

No shareholder, third-party investor, or financial institution other than Blue Label is willing to inject funding into Cell C, which means it is the last chance for the company.

This was revealed in a Cell C submission to the Independent Communications Authority of South Africa (ICASA).

The submission was linked to Cell C’s plan to transfer control of its spectrum, network, and service licences to The Prepaid Company.

The Prepaid Company is wholly owned by Blue Label Telecoms and is Cell C’s largest shareholder.

As part of a deal to provide further financial support to Cell C, The Prepaid Company is increasing its 49.53% non-controlling stake to a majority shareholding of 53.57%.

Cell C argues that The Prepaid Company requires a controlling interest in Cell C to control its recovery, given the huge investment it has made.

“The Prepaid Company has injected funding of R5.5 billion into Cell C, settled creditors’ claims, and granted Cell C a R1.03 billion loan,” the operator said.

Cell C CEO Jorge Mendes said this is the last chance for the company to survive and carve a niche for itself in the South African mobile market.

“It is the last roll of the dice. You can’t be continuously in and out of the market. We need to make a full go of this,” he told TechCentral.

Although this is Cell C’s last chance, Mendes said they have a good opportunity to carve a niche for themselves in the South African telecommunications market.

He admitted that Cell C was highly distressed when he joined the company in July 2023 after 24 years at Vodacom.

“When I looked at the headlines and saw Cell C from the outside, it looked chaotic, problematic, and financially distressed. There were questions of whether it would survive,” he said.

“The very things I noticed from the outside looking in turned out to be exactly right. The only difference is that it was deeper and wider in terms of the magnitude.”

He highlighted that Cell C had been recapitalised a few times. “Around R44 billion has been wiped out,” he said.

Mendes said over 99% of companies in Cell C’s position close their doors. “A small fraction survives and becomes unbelievable businesses.  I believe that is where we are,” he said.

Mendes said they have had exceptional partners along this journey, who have helped Cell C stay alive and ensure its place in South Africa.

Cell C’s ICASA submission pointed to the exceptional support the company has received from Blue Label and The Prepaid Company (TPC).

It has injected R5.5 billion into Cell C, settled creditors’ claims, loaned Cell C R1.03 billion and currently holds Cell C airtime and data stock of over R2.5 billion.

Blue Label Telecoms’ subsidiaries have made financial contributions in excess of R14.4 billion to Cell C.

“In this way, TPC and Blue Label have a vested interest in improving Cell C’s financial viability and significant exposure,” Cell C said.

Cell C has several shareholders and is not controlled by any of them. It said this dispersed shareholding had inhibited Cell C’s ability to improve its financial position.

The mobile operator said it lacked the necessary direction that would come with having a single controlling shareholder.

“In this context, TPC seeks to acquire additional shares in Cell C, thereby increasing its shareholding from a non-controlling 49.53% to a controlling 53.57%,” it said.

Cell C said it does not have funding from any other shareholder, investor or financial institution as they are unwilling to inject further funding into Cell C.

“No other entity is willing to provide Cell C – which is technically insolvent – with any form of financial assistance,” the mobile operator said.

“The proposed transaction is the only means available to Cell C to secure its continued operation and facilitate its financial recovery.”