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Cell C restructures debt as Blue Label acquires a holding

Blue Label Telecoms is acquiring a 35% stake in South Africa’s smallest mobile operator, Cell C.

The distributor and fellow South African firm will invest ZAR4 billion ($262.4 million) of new capital into Cell C, with current majority shareholder Oger Telecom slashing the size of its holding from 75% to around 27% and also pledging fresh capital.

This announcement provides answers to the uncertainty that has surrounded Cell C’s future for the past few months; the restructured ownership and injection of funding will reduce the operator’s debt. Blue Label has stated that the takeover should result in Cell C’s debt falling below ZAR8 billion.

In addition to the stakes held by Blue Label and Oger, around 30% of Cell C will be owned by its employees while CellSAf – a black economic empowerment (BEE) group – holds a "non-dilutable and fully unencumbered" stake of around 9%.

South African fixed line incumbent Telkom SA had as recently as last month been considering an acquisition of Cell C, but pulled out of talks when the parties failed to agree on a price. Reportedly, other major international operators including Orange and TeliaSonera were considering making an offer.

Chief executive of Cell C Jose Dos Santos had previously noted that the debt restructuring now enabled by Oger Telecom would be necessary before an acquisition could be agreed.

Blue Label CEO Mark Levy confirmed that the distributor would continue to provide prepaid airtime for all of the major South African operators, including Cell C’s rivals MTN and Vodacom.

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