In a bid to cut debt, South African mobile operator Cell C has proposed a major capital restructuring that could see sizeable stakes acquired by staff and airtime distributor Blue Label Telecom.
The announcement follows failed merger talks with South African incumbent Telkom SA.
In a stock exchange filing on Thursday, Blue Label announced it has offered to subscribe to 35% of Cell C’s share capital for 4 billion rand (€235.7 million). Meanwhile, in a statement purportedly issued by Cell C that was published by AllAfrica, the operator’s management has offered to invest ZAR2.5 billion (€145.4 million) in return for a 30% stake to be held by employees.
Cell C parent 3C Telecommunications, a subsidiary of Saudi Arabia’s Oger Telecom, would see its stake fall to 35% from 100%.
If carried out, the proposed transactions would reduce Cell C’s debt from "high double-digit numbers" to ZAR8 billion, Cell C said.
"The restructuring will allow us to support our continued growth, network expansion and investment in data networks. More importantly, should this transaction be approved it will become one of the largest employee ownership deals in the country," Cell C chief executive Jose Dos Santos, in a statement.
Also based in South Africa, Blue Label distributes prepaid airtime vouchers, electricity tokens, and also provides ticketing and financial services. It is one of Cell C’s primary distribution partners.
"The proposed transaction provides a compelling value proposition to Blue Label, as well as to Cell C and its customers, through vertical integration affording both companies the opportunity to realise synergies in product distributi on, and positioning Blue Label to benefit from the improved operational and financial performance that the combined platform would create," said Blue Label, in its stock exchange filing.
Blue Label said Cell C’s board will convene a meeting to discuss the offers. If approved, the capital restructuring will be effective from 1 June 2016.
Thursday’s development comes three weeks after incumbent operator Telkom SA walked away from negotiations with Cell C’s majority shareholder Oger Telecom over acquiring 100% of the company.
Amid mounting speculation, Telkom revealed in November it was performing due diligence on Cell C.
Had a deal gone ahead, the acquisition would have given Telkom’s mobile division a significant boost. As it stands, Telkom’s mobile arm is the smallest player in the market by some margin, claiming a share of just a few percent.
