Cell C, South Africa’s third-biggest mobile phone operator, posted a net loss in the first six months to end-June 2017 and reported a rise in subscribers.

The mobile phone operator reported a R588 million in net loss in the six months of 2017 compared to a R3 million profit in the same period in the previous year, according to an investor presentation published by Cell C’s listed partner, Blue Label.

Cell C also reported a 12% rise in total subscriber numbers to 15.7 million in its network at the end of June 2017.

The company which is planning to compete aggressively against its bigger rivals spent R561 million in capital expenditure compared to R1.7 billion in the previous period. Cell C’ said its capital expenditure slowed in the first quarter of 2017 due to the delayed recapitalisation but is expected to pick up again post recapitalisation.

The company added that the R561 million was strategically focused to provide mobile voice and data services through a combination of our own LTE-Advance network overlaying our LTE, 3G and 2G networks.

Cell C’s total revenue was up 11% to R7.7 billion with data revenue increasing 33% to R2.6 billion versus R1.9 billion in the previous year. The company’s service revenue was up 12% to R6.3 billion.

Cell C Recapitalisation is Not a Done Deal, warns BEE Partner CellSAf

In August, Cell C’s black economic empowerment shareholder, CellSAf, which currently holds 25% of South Africa’s third largest mobile operator, warned that the restructuring of the mobile phone operator is far from a “done deal”.

CELL C CEO Jose Dos Santos
CELL C CEO Jose Dos Santos

The country’s third-biggest mobile phone operator recently announced its restructuring involving Net 1 and Blue Label Telecoms.

The Cell C’s empowerment partner declared that the recapitalisation of the mobile phone operator amounts to a blatant attempt at corporate capture, and is likely to collapse under regulatory scrutiny.

CellSAf founded Cell C 16 years ago along with the now-bankrupt Middle-Eastern conglomerate, Saudi Oger.

After more than 2 years of obfuscation, secret negotiations and numerous contraventions of the Companies Act, Cell C management, Net 1 and Blue Label announced the conclusion and “approval” of the recapitalisation transaction on 07 August 2017, CellSAf said in a statement.

However, Cell C said in the presentation that it has made the necessary notification to ICASA as required in respect of the recapitalisation.

Despite this, CellSAf has made representations to ICASA that Cell C did not follow the correct process.

“Based on the 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,” the company said.

“Cell C has now made extensive written and oral submissions to ICASA providing details of the structure and effect of the transaction. 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 (CCC) for adjudication.”

Cell C added that the recapitalisation is not a merger within the meaning of the Competition Act.

Despite this, Cell C said CellSAf has laid a complaint with the Competition Commission that Cell C has not obtained approval from the Competition Commission.

The company added that it 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.

CellSAf: High Court Litigation

In November 2016, CellSAf issued summons in the High Court of South Africa against the then parties to the recapitalisation transaction seeking to have the agreements that had been signed prior to that date set aside.

“If this matter is ever heard by the Court on the merits of CellSAf’s claim, this is unlikely to be before 2019,” said Cell C.

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