Final hurdle for Cell C to transfer control of its spectrum and network licences

Blue Label Telecoms requires final approval from the Competition Tribunal for its subsidiary, The Prepaid Company, to gain control of Cell C as its majority shareholder.

Responding to media questions at the company’s half-year results presentation on Thursday, Blue Label co-ceo Brett Levy said they are waiting for a final hearing date from the Tribunal.

“We believe it should be anytime between June and August. We’re in their hands and we’re hoping for a good outcome,” Levy said.

Blue Label first applied for The Prepaid Company (TPC) to take control of Cell C in late 2023.

TPC currently holds a 63.19% economic interest in Cell C, but its voting power and control was capped at below 50%.

This can only increase with the permission of the Competition Tribunal and the telecommunications sector regulator, the Independent Communications Authority of South Africa (Icasa).

Per Icasa’s requirements, Cell C submitted an application to transfer control of its network, service, and spectrum licences to TPC.

Following public hearings regarding the transfer of control application in September 2024, Icasa granted Cell C’s request in January.

Cell C will remain the licence owner once the transaction has concluded.

The Competition Commission already greenlit Blue Label’s application in April 2024, recommending that the Competition Tribunal approve it.

With Icasa’s approval given, the last regulatory hurdle Blue Label needs to clear is the Competition Tribunal.

In documentation justifying the application, Cell C explained to Icasa that TPC had provided significant financial support to Cell C.

“The Prepaid Company has injected funding of R5.5 billion into Cell C, settled creditors’ claims, and granted Cell C a R1.03 billion loan,” Cell C said in a letter signed by regulatory executive head Themba Phiri.

The transfer of control application includes Cell C’s individual electronic communications service (I-ECS) and network service (I-ECNS) licenses and its radio frequency spectrum licences.

The radio frequency spectrum licences include its 2,100MHz, 900MHz, and 1,800MHz spectrum.

Transfer of control dispute

One of Cell C’s oldest shareholders, CellSAf, objected to the transfer of control of the operator’s licences.

CellSAf director and company secretary Nomonde Mabuya told MyBroadband that they were not consulted and that Cell C submitted the application without their knowledge.

“This licence transfer matter was never discussed with us. The first time we learned about it was when we saw the Icasa government gazette published on 6 December 2023,” said Mabuya.

She said it was particularly concerning that the matter had kept silent despite CellSAf regularly engaging with Blue Label Telecoms executives.

CellSAf submitted an objection to the licence control transfer to Icasa on 29 December 2023.

Mabuya was concerned that Blue Label was stripping other shareholders of Cell C’s key strategic assets, including its spectrum licence.

However, Cell C assured that the transfer of control application was a purely administrative issue and that Icasa makes a distinction between licence ownership and control.

The mobile operator explained it was legally obligated to transfer control of the licence due to amendments to the Electronic Communications Act in 2014.

A 2020 court ruling then clarified that a change of control among shareholders of a licensed entity equates to a change of control of its licences.

Specialist telecommunications regulatory law firm Ellipsis noted at the time of the ruling that Icasa had taken several licensees to task for making shareholding changes without first applying for a change of control.

These cases were referred to Icasa’s Complaints and Compliance Committee, which ordered offending licensees to undo their shareholding changes.

However, Ellipsis also highlighted then that there was no definition for “control” in the ECA.

To clarify this, Icasa issued a document titled Memorandum Regarding Control on 31 March 2021.

It explained that it would follow the Competition Act’s approach when considering control, which includes one party owning more than 50% of the shares of another.