Cell C may be sold as the majority shareholder looks to offload its shares. (Duncan Alfreds, Fin24)
Johannesburg - Embattled mobile network Cell C has rejected an offer to purchase from fixed and wireless operator Telkom, stating transactions with JSE-listed Blue Label Telecoms are still taking place.
Blue Label Telecoms is currently in the process of acquiring a
45% stake in South Africa’s third largest mobile network for R5.5bn.
Cell C chairperson Mohammed Hariri said the company has received an unsolicited, non-binding and conditional proposal from Telkom to purchase the company.
“Cell C board of directors would like to confirm that Cell C has already entered into legally binding agreements in terms of which it has committed to a recapitalisation transaction with, among other parties, Blue Label Telecoms Limited,” Hariri said in a statement.
“Cell C has undertaken to not enter into any agreement, incur any obligation or take any action which may restrict it or any of its affiliates from complying with its obligations under such agreements or which could result in the transactions envisaged in such agreements not proceeding to completion,” he continued.
READ: Cell C dumps bond placement in favour of restructuring
Cell C was recently downgraded to a ‘D’ credit rating by ratings firm Standard & Poor’s - the lowest junk status rating for a corporate company - shortly after withdrawing a bond placement, stating it could reduce its maximum net borrowings to less than R8bn through planned restructuring.
The bond placement process was expected to reduce Cell C's existing net borrowings to R8bn.
Blue Label Telecoms published a circular to shareholders stating that Cell C posted a profit of R2.8m for the six months ended June 30 2016.
This compares to a loss of R1.15bn for the period ended June 30 2015 and a net loss of R5.6bn for year ended December 31 2015, with revenues of R13.2bn for that year.
READ: Cell C downgraded to lowest junk status after missing payments
Blue Label had previously planned to acquire 35% of Cell C for R4bn. However, Net 1 UEPS Technologies subscribed to 118 million Blue Label shares for R2bn, meaning Net1 now has a 15% stake in Blue Label.
Management and staff of Cell C will also subscribe for 25% of the issued capital, with 3C Telecommunications set to hold the remaining 30% of the total issued share capital.
The deal and recapitalisation of Cell C will reduce the mobile network’s debt to R8bn.
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