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Cell C under siege

Vodacom is objecting to Cell C’s application to transfer control of its spectrum, network, and service licences to The Prepaid Company.

This is according to Vodacom regulatory affairs executive Andrew Barendse, who revealed the company’s stance in an affidavit filed in a separate court case.

Vodacom is suing the Independent Communications Authority of South Africa (Icasa) for approving certain spectrum pooling deals between MTN and other network operators — including Cell C.

In his affidavit, Barendse said that Icasa unlawfully allowed MTN to pool spectrum belonging to Cell C and Liquid Intelligent Technologies with its own, giving it a substantial competitive advantage.

“This was all done in secret, without any notice to Vodacom (or the public), and without any opportunity afforded to comment and make representations on whether this ought to be allowed,” he said.

News that Cell C applied to cede control of one of its biggest assets to its largest shareholder emerged in December when industry regulator Icasa gave notice of it via Government Gazette.

According to the notice, Cell C applied to transfer control of its I-ECS (network), I-ECNS (service), and radio frequency spectrum licences to The Prepaid Company, a subsidiary of Blue Label Telecoms and Cell C’s largest shareholder.

Cell C applied to transfer its 2100MHz, 900MHz, and 1800MHz spectrum licences, which is all of its premium raw wireless network capacity.

An analysis by Daily Investor last year found that Cell C’s spectrum is worth between R3.8 billion and R6.2 billion.

Icasa’s notice immediately raised concerns that Blue Label was trying to secure one of Cell C’s most valuable assets in the event that the mobile operator goes bankrupt.

Cell C has repeatedly assured that this was not the case and that it was merely complying with the law.

It explained that Blue Label had injected a substantial amount of money into the business via The Prepaid Company, effectively giving it a 63.19% stake in Cell C.

However, its voting power is capped at 49.53% until it gets approval from Icasa and the Competition Commission to take a controlling stake in the company.

Regulatory experts disagree about whether getting this approval from Icasa requires a change of control application for all of its licences.

Some say that this is how such matters are handled after Icasa published certain regulatory amendments and an explanatory memo in 2014 and 2021.

Others say there is nothing in law or regulation that says an application to take a controlling stake in a company is the same thing as controlling its licence.

This debate is not merely bike-shedding — there are real concerns over the ramifications of this transfer in the event that Cell C’s is liquidated.

Cell C has emphasised that Icasa had separated the concepts of licence control and ownership, and its application is only for transfer of control.

When MyBroadband asked whether the courts would see it the same way if Cell C were ever liquidated, the company refused to answer the question, dismissing it as “hypothetical”.

However, to Cell C’s creditors and minority shareholders, this question is far from hypothetical.

Cell C is totally insolvent, and the risk of liquidation cannot simply be dismissed.

For creditors, the question of whether a R3.8–R6.2 billion asset goes into Cell C’s insolvent estate or becomes the sole property of The Prepaid Company is very real.

Barendse said Vodacom has raised an objection to Cell C’s transfer of control application for, among other things, its spectrum pooling arrangement with MTN.

He argued that MTN being allowed to pool a portion of Cell C’s spectrum already constituted a change of control that had not been properly applied for.

In Vodacom’s view, it is impossible to assess Cell C’s transfer of control application without first considering the impact of its deal with MTN.

MyBroadband contacted Cell C for comment, but it did not provide feedback by publication.

Source

mybroadband.co.za

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