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CellSaf ups the fight

Nov 05 2017 06:00
Justin Brown

Johannesburg - Cell C’s empowerment partner, CellSaf, is keeping up its fight against the takeover of the mobile operator by a number of companies, including Blue Label Telecoms.

CellSaf is contesting the matter in the high court and has also lodged complaints with the Competition Commission and the Independent Communications Authority of SA (Icasa).

In a new development, it appears increasingly likely that the CellSaf complaint to Icasa could get a public hearing.

Currently, the complaint is being dealt with behind the scenes by Icasa together with CellSaf and Cell C.

This week, a Cell C representative said: “We are awaiting Icasa’s decision as to whether to accept Cell C’s position or to refer the matter to Icasa’s Complaints and Compliance Committee for adjudication.”

Nomonde Mabuya, director and company secretary of CellSaf, said there “must be a public hearing” regarding CellSaf’s complaint to Icasa.

A referral to the Icasa committee could see a public hearing on the CellSaf complaint being held.

Icasa spokesperson Paseka Maleka said CellSaf’s complaint was being discussed internally.

He did not reply to questions about whether Icasa would refer the matter to its complaints committee.

Mabuya said the commission had given CellSaf until November 17 to reply to Cell C’s response to its complaint.

This week, Cell C disclosed in a roadshow presentation that the operator had posted a loss of R588 million for the first half of this year, compared to an interim profit of R3 million in the first six months of 2016.

This despite increasing its subscriber base to 15.7 million – up from 14 million at the end of June last year.

Tyrone Soondarjee, Cell C chief financial officer, said the reason for the net loss included foreign exchange and finance charges.

Zwelakhe Mankazana, a CellSaf board member, said that with Cell C making losses or barely making profits, there was “no way” that the debt that the CellSaf shareholders owed could be paid back.

“We have received no dividends since inception,” Mankazana added.

Mabuya said: “This is a blatant act of fronting.”

Mankazana said the Cell C road show could mean that the company was seeking to list and to cement the Blue Label Telecoms deal.

Soondarjee said the road show was not part of plans to list Cell C on the JSE or any other bourse.

CellSaf is arguing that the recapitalisation deal with Blue Label will see the control of Cell C changing and, should it be concluded in its current state, Cell C will lack a sufficient empowerment stake.

In a complaint to Icasa, filed in July – which City Press has seen – CellSaf writes:

“We put forward the argument that since Cell C was granted the licence with CellSaf as the integral BEE entity that was specifically scrutinised and approved by the minister of communications and the authority, it cannot be unilaterally diluted and replaced by another entity, without just cause and the same level of scrutiny and approval from relevant authorities.”

CellSaf has been opposing the transaction from the date that it first became aware of it: December 10 2015.

In the same written complaint to Icasa, the BEE consortium goes on to state:

“CellSaf submits that the proposed transaction amounts to a change of control and a pledge and cession of control in the individual licence granted to Cell C.”

CellSaf contends that the structure of the takeover by a consortium led by Blue Label Telecoms does not constitute “genuine empowerment” and calls on Icasa to subject the deal to “appropriate scrutiny”.

Referring to the lengthy legal case regarding the buyout of Neotel by Vodacom, CellSaf said the court had ruled that a 30% BEE ownership must be present at the time of application and Icasa had no discretion to postpone compliance with this requirement.

In October 2014, Icasa published a notice in the Government Gazette declaring that it would no longer approve licence transfer applications which did not have a 30% BEE equity ownership, CellSaf said.

CellSaf’s Mankazana estimates that Cell C has an empowerment interest of 20%, including the 7.5% stake that the BEE consortium has been allocated in terms of the contested deal.

CellSaf has called on Icasa to probe Cell C’s claims that it has met or exceeded the 30% BEE equity ownership requirement.

“We submit that the structure of the ... proposed transaction is unlawful and prejudicial to both Cell C and CellSaf,” writes CellSaf to Icasa.

CellSaf also argues that Cell C and the parties to the deal are in breach of competition laws and regulations.

“CellSaf submits that the proposed transaction constitutes a notifiable merger that has been prior [sic] implemented. In this regard, CellSaf has made a formal submission to the commission.”

CellSaf is looking to Icasa to restore the BEE consortium to its original ownership position, as well as to set aside the transaction and impose appropriate penalties.

On August 30, Icasa issued a statement acknowledging that it had received a notification from Cell C regarding the change of shareholding at the company:

“The authority has considered the notification, and the preliminary view is that the Cell C recapitalisation transaction – on the face of it – triggers the provisions of section 13 of the Electronic Communications Act of 2015 and ought to have been filed as an application for change of control of the licensee.”

Sipho Ngwema, head of communications at the Competition Commission, said this week that CellSaf’s complaint was still under investigation.

Cell C said, as part of its investor presentation, that it had “made the necessary notification to Icasa”.

“Based on many and various detailed legal opinions from eminent senior counsel obtained by the parties to the recapitalisation, Cell C has, in fact, followed the correct process,” it stated.

“Cell C has now made extensive written and oral submissions to Icasa, providing details of the structure and effect of the transaction.”

Cell C said the recapitalisation deal with Blue Label was not a merger within the meaning of the Competition Act.

“Cell C has now made an extensive submission to the Competition Commission to explain the factual and legal position as to why this is not a notifiable merger.”

Turning to CellSaf’s litigation, filed with the Johannesburg High Court in November last year, Cell C said that if the matter was heard in court, this would be unlikely to be before 2019.

In response, Mabuya said Cell C’s statement about the 2019 hearing showed the delay tactics being used by the mobile operator to keep the case out of court.

cellsaf  |  cell c  |  icasa  |  bee
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