Cell C Campus
Cell C Campus (Photo Credit: Atterbury Properties)

Cell C’s black economic empowerment shareholder, CellSAf, is refusing to end its legal fight against Cell C to allow the mobile phone operator to be purchased by Blue Label and Net 1.

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

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

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.

According to a report by the City Press, CellSaf is contesting the matter in the high court and has lodged complaints with the Competition Commission and communications watchdog ICASA (Independent Communications Authority of South Africa).

City Press reported that 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.

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

On Friday Cell C posted a net loss in the first six months to end-June 2017 and reported a rise in subscribers.

The mobile phone operator reported R588 million in net loss in the six months of 2017 compared to 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.

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.

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 the 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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