SA’s Cell C gets $350-million investment

Cell C is pleased to announce two significant inflows of long-term capital that will cement the company’s ability to continue offering competitive and innovative products and services and ultimately lower the cost to communicate in South Africa.

Cell C CEO, Alan Knott-Craig (Image source: File)

Oger Telecom, Cell C’s majority shareholder, has earmarked an equity investment of USD350 million (about R3.5 billion at the current exchange rates) into Cell C.

The injection follows the Independent Communications Authority of SA’s announcement in June to conduct a market review of the remedies under the Call Termination Regulations and other programmes aimed at addressing the high cost to communicate in South Africa.

The cash boost shows Oger Telecom’s continued confidence in the Cell C strategy and its belief in a fair regulatory outcome of the review, focussing on sustainable competition in the market, that will unlock the potential of the business and lead to lower prices for consumers.

The equity investment of USD350 million for 2013 is in addition to the USD200 million equity invested in 2012 and a further significant investment scheduled for 2014.

“Under the leadership of Alan Knott-Craig, Cell C has gone from strength to strength. The company has a solid business strategy and we are confident that the Regulator will make decisions that give smaller players a better chance of being sustainable competitors. It is on this basis that we as shareholders are fully committed to the company and the country,” says Mr Mohammed Hariri, Chairman of both Cell C and Oger Telecom.

Cell C has been exceptionally competitive over the last year, acquiring market share from its competitors and reducing mobile tariffs to its customers. The company now has over 11.5 million customers.

“ICASA’s decision to conduct a market review of the remedies under the Call Termination Regulations has bolstered our shareholders’ confidence in the future of Cell C and the industry. The equity injection also strengthens our balance sheet. But Cell C needs aggressive and proactive regulatory support to continue its drive to reduce the cost to communicate in South Africa and remain sustainable in the process,” says Cell C CEO, Alan Knott-Craig.

As part of ICASA’s holistic look at the telecommunications industry under its Cost to Communicate Programme, it will review the Call Termination Regulations. This is a positive move by ICASA, which has committed to focussing on specific remedies and not a wide review. And there are a number of possible remedies of which the most important are aggressive and sustained asymmetry, mandatory flat rates and lower mobile termination rates for operators with significant market power.

“With this financial injection and a regulatory outcome that promotes sustainable competition for smaller players, Cell C will lead the way in lowering the cost to communicate and further expand its network coverage,” says Knott-Craig.

In addition to the shareholder injection, key lenders, including Nedbank and DBSA, have just concluded a long-term financing package of R2,2 billion to Cell C, in a transaction arranged by Nedbank.

“Nedbank has again shown its support for Cell C and we thank the institution for working on this package for us. The financing package also carries partial guarantees from Oger Telecom, in a further indication of its support,” says Knott-Craig.

The combined funding, of equity and loans, will provide the company with a sizeable pool of liquidity to continue investing in its network quality, customer base and product offerings. In addition, the funding structure ensures the company maintains an appropriate capital structure and balance sheet to sustain its drive to offer compelling tariffs and services to its customers.

“Our shareholders have indicated a willingness to inject further equity in 2014, if, as anticipated, the review by the Regulator facilitates a more competitive industry where smaller players like Cell C can remain sustainable,” said Knott-Craig.

Staff writer