MTN roaming deal is key to Cell C’s revival
JOHANNESBURG – Cell C, South Africa’s third-largest telecoms company, expects to announce the terms of an extended national roaming agreement with MTN by the end of the month, paving the way for its recapitalisation.
Cell C was expected to finalise the long-form agreement, which would allow it to finalise its new business plan aimed at rebalancing its traffic and efficient use of assets.
The new business plan paves the way for the finalisation of the recapitalisation transaction.
Nicola White, the spokesperson for Blue Label Telecoms, the majority owner of Cell C, said on Friday that the company would notify the market when the long-form agreement was finalised.
“This would detail how the extended roaming agreement will work, as well as its commercial terms,” she said.
Cell C’s recapitalisation by the Buffet Consortium depends on the implementation of the new business plan and extracting value from the roaming agreement.
“Once the long-form agreement is signed, Cell C can then finalise its business plan, which will then allow us to conclude the Buffet transaction.
“We hope to announce further details of the recapitalisation plan before the end of the the year. The Buffet deal is on track,” she said.
White denied media reports that Cell C was putting its assets on sale, as well as rumours of a take-over bid by China Mobile.
Cell C, which faces a liquidity crunch, has underperformed in a highly competitive market.
Its customers are roaming on MTN thanks to a roaming agreement with MTN, aimed at helping the group cut costs and capital expenditure as it grapples high debt-levels.
Cell C and MTN signed a roaming agreement in November 2018, which saw Cell C relocate its roaming traffic from Vodacom. It also gave Cell C access to roaming 4G/LTE services for the first time.
In August, the company announced the finalisation of a term sheet for a further national roaming agreement with rival MTN.
In February, Blue Label Telecoms said the Buffet consortium agreed to become a minority shareholder in Cell C. The Buffet consortium, backed by billionaire Jonathan Beare, is expected to become a minority shareholder in the mobile operator to bolster its balance sheet and ensure that Cell C is sustainable.
Ofentse Dazela, the director of pricing research at Africa Analysis, said Cell C had to improve its balance sheet. “It boils down to trying to effectively manage its cash flow.
“Cell C is burdened by debt, and wants to transform into a lean machine,” Dazela said. “The company needs an urgent capital injection through recapitalisation.”
Cell C chief executive Douglas Craigie Stevenson told shareholders in July that the company had appointed Deloitte as independent financial restructuring advisers to help in optimising business processes.
This was as the company continued to face real challenges and had implemented a wide range of initiatives across the business to improve corporate governance, including driving greater transparency to the board.
Craigie Stevenson also said in July that Cell C had appointed law firm Bowmans to investigate any parts of the business where they suspect that there “might be irregular business practices, and hired PricewaterhouseCoopers to do a full procurement audit and review of its processes”.
Blue Label shares closed 6.14percent lower at R2.60 on the JSE on Friday.