Blue Label to take control of Cell C's telecoms licenses in SA

South African operator Cell C has requested to have its telecoms licenses transferred to shareholder Blue Label Telecoms.

The Independent Communications Authority of South Africa (ICASA) published a notice in a government gazette last week saying it had received applications from Cell C for the transfer of control of its Individual Electronic Communications Service (I-ECS), Individual Electronic Communications Network Service (I-ECNS) and Radio Frequency Spectrum (RFS) licenses to The Prepaid Company (TPC) which is a subsidiary of Blue Label.

ICASA said it will consider whether the proposed transaction would promote competition in the ICT sector under the terms of the country's Electronic Communications Act (ECA).

The transfer application will also be evaluated on whether it would be in the interests of consumers and whether TPC has enough equity ownership by historically disadvantaged persons.

In February 2023, Blue Label said it had intentions to take a controlling stake in Cell C so it could have more impact on the operator's strategy going forward.

Blue Label Telecoms Joint-CEO Brett Levy reiterated this plan in an interview with Connecting Africa in August 2023.

At the time he wouldn't give an exact percentage it was aiming to buy but said anything above 51% would do the trick. Currently Blue Label, through TPC, owns a 49.53% stake in Cell C.

Levy said Blue Label would need regulatory approval from ICASA and South Africa's Competition Commission.

Blue Label Telecoms' earnings for the year ended May 31, 2023, were negatively impacted by its investment in Cell C as well as rolling blackouts that plagued South Africa over the past year.

Blue Label's core headline earnings per share (a key profit measure in South Africa) dropped by 62% year-over-year (YoY).

Cell C also recently published a trading update for the period to September 2023 saying that its business stabilization efforts were yielding improved results, positioning it to return to growth and enhanced competitiveness in the market.

Turbulent times at Cell C

In August 2017, Blue Label bought a 45% stake in Cell C for R5.5 billion (about US$420 million at the time). But, by the end of 2019, it had to write down the value of its entire investment in Cell C to zero.

Blue Label's investment was part of Cell C's first recapitalization. But the telco has faced serious financial challenges and spent about four years working on the second recapitalization as a way to reduce its debt and help stabilize the company.

Want to know more? Sign up to get the weekly Connecting Africa newsletter direct to your inbox.

The second recapitalization of Cell C was finally concluded in September 2022, after which Blue Label effectively owned 49.53% of the operator.

Related posts:

*Top image is of Blue Label Telecoms Joint-CEO Brett Levy. (Source: Blue Label Telecoms)

— Paula Gilbert, Editor, Connecting Africa