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Johannesburg - Finalising the complicated process of acquiring a 45% stake in Cell C felt like ‘the birth of a child’, Blue Label Telecoms [JSE:BLU] CEO Mark Levy told Fin24.
“It really has been one of the defining moments for Blue Label and we have been told this has been one of the most complicated transactions in South Africa,” Levy told Fin24.
“When you have stakeholders across various banks in the country and agendas, it becomes harder to come to an agreement, but we do not want to harp on the past. But it is like a mother giving birth to a child, we have experienced our labour pains and we need to focus on going forward,” Levy added.
On Monday, the airtime retailer reached the conclusion of its recapitalisation of mobile operator Cell C.
Blue Label’s wholly-owned subsidiary, The Prepaid Company, now owns 45% of the issued share capital of Cell C and a further subscription from Net1 [JSE:NT1] for R2bn.
The recapitalisation resulted in Cell C’s net borrowings falling to below R6bn, with The Prepaid Company now owning 45% of the issued share capital of Cell C for a subscription price of R5.5bn.
Blue Label had agreed to provide liquidity support in the form of interest-bearing subordinated loans of up to $60m to a special purpose vehicle set up to hold shares in Cell C.
In addition, Blue Label said that The Prepaid Company’s R900m acquisition of 47.37% of 3G Mobile, one of Africa’s largest mobile distributors, was also implemented and is part of a larger 100% takeover deal worth R1.9bn.
Blue Label said 3G Mobile would be used to expand into the financing and supply of mobile devices, handsets and allied products to distribute into the low cost smartphone market.
At the close of the transaction Blue Label Telecoms holds 45% in Cell C, 3C Telecommunications 30% (in turn held as 29.4% by the Employee Believe Trust, 45.6% by Oger Telecoms and 25% by broad-based black empowerment grouping CellSAf), Net1 15% and Cell C management and staff 10%.
“We are delighted to have finally concluded the investments in Cell C and DNI, and look forward to the exciting prospects that lie ahead for each of our organisations”, Net1 CEO Herman Kotze said in a statement.
“The conclusion of our recapitalisation, with the introduction of key strategic partners like Net1 and Blue Label, sets Cell C up to be a disruptor in the traditional mobile market in South Africa,” said Jose Dos Santos, CEO of Cell C.
“With Net1’s products, logistical expertise, technology and rural footprint, along with distribution platforms of Blue Label and DNI, we are confident of picking up a significant amount of share in an otherwise relatively stagnant industry,” he added.
Levy told Fin24 that Cell C would now have a restructured balance, allowing the network more room to focus on building the business.
As a neutral prepaid airtime and starter package distributor across all networks, Levy said that the company would run vertically to ensure growth of the Blue Label Telecoms business and that of the mobile network.
Cell C was recently downgraded to a ‘D’ credit rating by ratings firm Standard & Poor’s - the lowest or junk status rating for a corporate company - shortly after withdrawing a bond placement, previously stating it could reduce its maximum net borrowings to less than R8bn through planned restructuring.
Cell C is South Africa's third largest mobile network with about 24 million subscribers.
