Blue Label Telecoms’ subsidiary has applied to transfer Cell C’s operating licence and frequency spectrum into its control
The biggest shareholder in South Africa’s fourth largest mobile operator, Cell C, wants to take control of the operator. Since launching in 2001, Cell C has struggled against the superior investment power of Vodafone and MTN, and made some strategic missteps.
It looked like salvation was at hand in 2017 when Blue Label Telecoms pumped $369 million into the company. Blue Telecoms provides mobile commerce platforms and other tech to mobile operators.
However, just two years later, in May 2019, Blue Label wrote off its investment and suffered ‘fair value losses’ of more than $31 million. State-backed Telkom, which entered the mobile market in 2010, tried and failed to acquire Cell C.
Restructuring debt
In September 2022, after much wrangling, Cell C was recapitalised with debt holders recouping only 20% of what they were owed.
In July this year, Cell C deactivated its its own RAN, and instead adopted an MVNO approach, running on a virtualised RAN on MTN’s physical infrastructure. In the same month, Jorge Mendes, a veteran from Vodacom, became CEO and is tasked with turning the company round. He complained about high mobile termination rates in his first public outing in the role.
In August, Blue Label agreed to take control of Cell C by increasing its shareholding to above 50%, and now has put this plan into action. When the plan was announced, Blue Label’s Co-CEO, Brett Levy, said the company’s shareholding in Cell C was in “no-man’s land,” according to a report in Techcentral. He said the choices were to dispose of its stake or “move into a position where we can get involved on a day-to-day basis”.
Actioning the strategy
Which is why Blue Label Telecoms has applied to the regulator, the Independent Communications Authority of South Africa (ICASA), to transfer Cell C’s operating licence and spectrum to The Prepaid Company (TPC), a subsidiary of Blue Label Telecoms. ICASA has put a notice in the official Government Gazette detailing the proposed move.
Specifically, Cell C is to cede control of its Individual Electronic Communications Service (I-ECS) and Individual Electronic Communications Network Service (I-ECNS) licences. This would hand TPC the rights to Cell C’s permit to build and operate wholesale communications infrastructure.
To facilitate the takeover, TPC is upping its stake to 53.5% to gain a controlling shareholding.
TPC also requires permission for the transfer of control from the Competition Commission.
If it gains the approvals, as is expected, the transfer would be “one critical takeovers in the South African telecoms market,” according to Developing Telecoms. It is not clear how the change of ownership will cure Cell C’s ills.