5 reasons why Cell C might be seeking a buyer

South African mobile operator, Cell C has entered an agreement which will see Blue Label telecoms acquire a 45% stake in Cell C as part of its recapitalisation programme.

Reports have surfaced that there is also a third party; an unnamed firm that plans to invest over R2bn in exchange for a 15% stake in the mobile Cell C. The mobile operator’s debt is estimated at R23bn.

Here are 5 reasons why Cell C might be considering selling.

• Alleged legal action threats from BEE partner CellSAf which owns 25% of Cell C. According to reports by Business Live, CellSAf’s shareholding in Cell C will be reduced to 7.5 % and the company is expected to assume additional liabilities of almost R3 billion if the mobile operator goes through with the Blue Label deal. Cell C’s current financial status is strained and as it stands, legal action might put more strain on the company. A statement by Cell C has disputed the reports.
• Low corporate Credit rating
  Cell C has been downgraded to junk status by ratings agency S&P Global. This makes recovery for Cell C even harder.
• Multiple debtors: According to reports, Cell C’s debtors include China Africa Development Fund, the Industrial and Commercial Bank of China (ICBC), Nedbank and the Development Bank of Southern Africa.
• Maintaining telecommunication infrastructure is expensive. It is reported that competitors MTN and Vodacom invest over 10 billion each year in network maintenance. With Cell C in so much debt, it might be a bit difficult for them to invest at such levels.
• The threat from competition: Keeping up with competitors who already dominate the South African market might be a bridge too far for Cell C.

Fundisiwe Maseko