Blue Label Telecoms chairman Larry Nestadt has acquired millions of rand worth of shares in the company in recent weeks as its stock price continued to plumb levels last seen a decade ago. Original Link
TechCentral’s interview with Brett and Mark Levy, the co-CEOs of Blue Label Telecoms, was by far TechCentral’s most popular podcast in September 2018, according to statistics from platform partner iono.fm. Original Link
As Blue Label’s share price on Wednesday fell to the same level as its debut price on the JSE 11 years ago, the company’s management team has moved to assure the market that its acquisition of 45% of Cell C was not only well thought through but will deliver the expected returns. Original Link
Shares in Blue Label Telecoms, which owns 45% of Cell C, fell by 8% on Tuesday after the mobile operator reported half-year results to 30 June 2018 that showed a net loss after tax of R645-million. Original Link
South Africans want data prices to fall. Instead, it’s the shares of the big listed telecommunications companies that are tumbling.
Share prices have come under significant downward pressure in recent weeks, with Vodacom, MTN, Telkom and Cell C shareholder Blue Label Telecoms all falling sharply. They are all trading at, or near to, multi-year lows.
The selloff continued into Wednesday amid broad market declines as investors increasingly take a risk-off stance on emerging markets, including South Africa.
In the past 30 days, Vodacom shares have lost 22% of their value. They’re even down over three years, falling more than 10% in that period.
Someone who had invested in Vodacom five years ago would have seen a gain of only 18% (excluding dividends) in that time — not enough to keep pace with the consumer inflation rate.
Vodacom shareholders are still, however, significantly better off than those who invested in MTN five years ago.
MTN’s share price has lost 12% in the past month, but over three years it’s down a massive 53% (in part due to its previous troubles in Nigeria and in part because of the US recently re-imposing tough sanctions on Iran, one of the group’s key markets). Over five years, it’s off 41%.
Telkom has fared slightly better, with its shares losing 10% in the past month and 20% over three years. Over five years, the shares are up an impressive 196%, but much of that gain took place in 2014. Since April 2015, Telkom’s shares drifted lower.
Blue Label Telecoms, which last year acquired 45% of Cell C for R5.5-billion, has also seen its shares come under significant selling pressure. In the past 30 days, they have declined by 14%. Over three years, however, it’s the best performing of the telecoms stocks, with its value climbing 25%.
Blue Label Telecoms has described claims made by disgruntled Cell C shareholder CellSAf in a media statement on Wednesday as “factually incorrect in all respects”. Cell C has called CellSAf’s statement “yet another in a long list of baseless accusations”.
In the statement, CellSAf said recent hearings by communications regulator Icasa “revealed potentially fatal flaws, if not possible regulatory breaches”, by new Cell C shareholders Blue Label and Net1 UEPS Technologies.
“Cell C sold its recapitalisation as necessary for the business and good for empowerment and for its staff. It has attempted to sail through the regulatory process by maintaining that the deal did not result in a change of ownership and that regulators therefore weren’t required to ask questions about empowerment,” CellSAf said.
However, it claimed Cell C chief legal officer Graham Mackinnon “admitted” at the hearings that “the Competition Commission’s current view is that there has been an acquisition of control in Cell C by Blue Label Telecoms”, which, it said, could lead to regulatory sanctions being imposed. Blue Label acquired 45% of Cell C for R5.5bn in 2017 as part of the recapitalisation programme.
“Mackinnon also claimed that the debt of over R2.5bn incurred by the staff of Cell C, for an 8.82% stake in the company, acquired through a purchase from the exiting and now bankrupt former controlling shareholder Oger Telecom, would be repaid as a result of the company ‘performing, hopefully, well enough that all shareholders receive a return”.
“The recapitalisation has had the opposite effect to these claims and the company’s poor performance in the nine months since it concluded the recapitalisation has led to a further downgrade by ratings agency Standard & Poor’s, which both Cell C and Blue Label have kept mum about.”
It said Blue Label and Cell C could face sanctions from stock exchanges, investors and other regulators “for failing to disclose these critical regulatory and ratings developments”.
But Blue Label hit back on Wednesday, accusing CellSAf of making inaccurate statements. “Graham McKinnon,” it said, “has denied making the statements alleged by CellSAf. The competition authorities have not made a finding that the recap deal requires their consent.”
Cell C, meanwhile, described the accusations as “baseless”.
“In its latest attempt to discredit Cell C, CellSAf has misquoted Cell C’s submission and oral representations to Icasa in response to the regulator’s plans to promote broad-based black economic empowerment and ownership in the ICT sector in general that had absolutely nothing to do with CellSAf,” the operator said.
“Cell C’s presentation was exceptionally positive and well-received by the regulator. It is astounding that CellSAf is now ascribing its own distorted meaning to Cell C’s presentation on this matter.”
The company said CellSAf’s claims “are in keeping with the litany of untruths and distortions that it has made over the years and its continued attempts to discredit Cell C”.
“It is clear that CellSAf is not confident in its case, which it has lodged in court, as it continues to air its unfounded grievances in the media, rather than allowing the legal process to run its course.”
On S&P’s decision to downgrade Cell C’s debt, CellSAf claimed the mobile operator “is not performing as well as Blue Label and Net1 had expected it to or are telling the markets it is”.
In response to the downgrade, Cell C said it is not linked to the performance of the company. “The S&P statement regarding the downgrade — which was made public on 7 May — in fact acknowledged the positive performance of Cell C.”
It said it has been only 10 months since the recapitalisation and “since then the performance of the company has been in line with expectations set by management and shareholders.”
“Potential funders have indicated they would only consider engaging with Cell C following their analysis of its 2017 annual results, which were only announced in February,” Cell C said. “We believe the expectation by S&P on Cell C to secure financing facilities in such a short time frame following the recapitalisation was unrealistic.
“Notwithstanding this, Cell C has made significant progress and has put measures in place to ensure the stability and sustainability of the business. The company is also well advanced in arranging long-term facilities to refinance existing debt and raising new capex financing for utilisation in the next 24 months. These debt facilities will improve Cell C’s capital structure, debt maturity profile and funding mix and will fundamentally address liquidity concerns ahead of its intended listing in the medium to long term.”
Cell C has in the interim secured shorter-term financing facilities to manage liquidity while the company concludes the new debt package, it said.
“The downgrade in no way affects the existing capital structure of Cell C, which remains in place,” it added.
MTN has emerged as Africa’s most valuable telecommunications brand in 2018, according to a new research report by brand valuation and strategy consultancy Brand Finance.
The MTN brand is worth US$3.3bn, up 9% from 2017’s report, Brand Finance said. It has moved up two places in the past year, from 47th to 45th worldwide. Vodacom is not included in the list as it falls under Vodafone, which is 10th, down from seventh previously, with a brand value of $18.7bn.
Other African companies included in the 2018 list are Kenya’s Safaricom (99th), Morocco’s Maroc Telecom (111th), Nigeria’s Glo Mobile (130th), Senegal’s Sonatel (136th), Telkom (140th), Cell C (158th), Morocco’s Inwi (169th), Telecom Egypt (201st), Blue Label Telecoms (207th) and Zimbabwe’s Econet (223rd).
US telecoms players continue to dominate the Brand Finance Telecoms 300 league table, with AT&T retaining the title of the sector’s most valuable brand, but most US brands experienced a loss in value as they faced growing competition from Internet giants.
The top 10 companies in the listing are AT&T (US), Verizon (US), China Mobile (China), NTT Group (Japan), Deutsche Telekom (Germany), Xfinity (US), China Telecom (China), Orange (France), SoftBank (Japan) and Vodafone (UK).
Nokia is fastest growing telecoms infrastructure brand, up 71% to an $8.4bn brand value. However, China’s Huawei comes out top in the Brand Finance Telecoms Infrastructure league table, valued at $38bn, up 51% from last year.
“While American telecoms brands are at the top of the table, they are grappling with falling brand values as they find themselves navigating a complex regulatory environment and competitive offerings from the Internet challengers, all while battling sinking revenues,” said Brand Finance CEO David Haigh in a statement.
“In order to survive in the digital era, telcos must put up a strong fight by adopting innovative strategies. Nevertheless, when taking a snapshot of brand representation by country, the US still dominates as American brands hold the largest share or 28% of the total brand value in the Brand Finance Telecoms 300 league table.” — (c) 2018 NewsCentral Media
Cell C will list on the stock market, possibly as soon as 24 months from now, according to the mobile operator’s CEO, Jose Dos Santos.
Speaking to TechCentral this week, Dos Santos said the company has pencilled in late 2019 or early 2020 for a stock market debut. Before then, the newly recapitalised business wants to demonstrate consistent growth over several reporting periods.
News of the planned listing comes in the same week that Cell C reported an underlying or “normalised” net loss after tax of R26m on service revenue that climbed 12% to R13.1bn. With the once-off effect’s of 2017’s recapitalisation included, the operator reported a R4.1bn net profit.
Last year, Blue Label Telecoms and Net1 UEPS Technologies together acquired 60% of Cell C as part of the restructuring and recapitalisation of the business, which trimmed to its interest-bearing debt to a more manageable R6.8bn, from R17.7bn previously.
Total revenue for the year, which ended on 31 December 2017, was R15.7bn, up 7% from 2016. Earnings before interest, tax, depreciation and amortisation rose by 151% to R7.8bn. Active subscriber numbers rose by 6% to 16.3m.
Cell C said capital expenditure plunged 47% to R1.2bn, but that this number will rise in 2018 to north of R3bn following the successful recapitalisation.
“While our turnaround strategy was put in place in 2012, the recapitalisation of Cell C last year has really allowed us to create a strong foundation for the business. Our plans now are to build out this strategy and really accelerate our growth and investment,” said Dos Santos.
The increase in service revenue was largely the result of increased data volumes, which rose 90%. Data revenue rose by 29%. The effective cost per megabyte of data fell by 36% during the year. The number of smartphones on the Cell C network increased by 21% year on year to 9.2m devices. Cell C’s current active data customers increased to 12.6m.
Voice revenue fell by 4%, in line with a 4% reduction in the average cost of calls.
On TalkCentral this week, Duncan McLeod and Regardt van der Berg preview what’s expected at Mobile World Congress 2018, which kicks off on Monday. What new phones are coming, and what will be the talk of Barcelona next week?
Also on the show, there’s a discussion about the Cell C and Blue Label Telecoms results, smartphone sales decline for the first time ever, more thoughts on the wholesale open-access network and new iPads are coming.
Listen to the show who’s been named winner and loser of the week.
Duncan’s pick this week is Stars, while Regardt has picked the financial Excel sheet developed Sam Beckbessinger, who has just published a new book on how to manage your money better.
How to subscribe to TechCentral’s podcasts
There are many ways to enjoy TechCentral’s podcasts, beyond simply streaming them from the website. The best way is by subscribing to them using an app on your phone, allowing you to listen in the car (via Bluetooth), at the gym or wherever you happen to be.
The TalkCentral RSS feed is available via iono.fm. Use it to subscribe to the show in your favourite reader (we’re big fans of Pocket Casts for Android, iOS and Windows Phone — look for “TechCentral” in its search engine).
If you want to subscribe to the TechCentral podcast — interviews with technology leaders in South Africa and other smart and interesting people — you’ll find the RSS here. If it’s The Best in Tech podcast you’re looking for, that RSS is over here.
We’d love your feedback on the show — please use the comments box below this article. Alternatively, drop us an e-mail. — (c) 2018 NewsCentral Media
Blue Label Telecoms’ share price soared 15% on Thursday after reporting a strong set of interim results for the six months ended 30 November 2017.
Adjusted core headline earnings per share — stripping out the effects of the Cell C and 3G Mobile acquisitions to provide a “like-for-like” comparison — shot up by 21% year on year to 75.59c.
With the two acquisitions factored into the numbers, core Heps rose by 108% to 168.42c on revenue of R13.5bn.
Core headline earnings were R1.4bn. Earnings included the group’s share of profits in Cell C of R928m, of which R865m was from the recognition of a deferred tax asset. Cell C has as much as another R3bn it can recognise, which the mobile operator intends to apply in the coming years. Blue Label’s share of profits from 3G Mobile amounted to R36m.
Blue Label co-CEO Brett Levy said the company’s acquisition of a 45% stake in Cell C in a deal worth R5.5bn will soon begin to bear significant fruit for the group. “It will be a very strong third network that has a lot to offer consumers. Results for 2017 were exceptional, but a lot of it was to do with the recapitalisation.”
Levy hinted that he expects Cell C’s 2018 financial performance to be robust.
“Our investment in Cell C provides a compelling value proposition to the group, to Cell C and its customers through vertical integration that will afford both companies the opportunity to realise synergies in product distribution,” Blue Label said in a statement. “Cell C now has a sustainable capital structure to deliver on its strategic objectives.”
Levy’s co-CEO (and brother), Mark Levy, said the Cell C and 3G Mobile deals have created a platform for further strong growth in the years to come.
A big focus for 2018 is on expanding Blue Label’s distribution footprint and product offerings, particularly in the informal market, the group said. This will be done by providing many more point-of-sale devices to independent traders.
3G Mobile is expected to benefit from growing demand for low-cost and refurbished smartphones. Through subsidiary Comm Equipment Company, it plans to offer financing to consumers on a range of products beyond cellphones, including satellite decoders.
In prepaid electricity, where growth continues to be robust — albeit on thin margins — Blue Label intends to work with key municipalities to offer a “full turnkey revenue management system, credit control services, audits, meter replacements and new installations”.
Its Mexican operation, meanwhile, is soon expected to contribute to group profits for the first time thanks to an improvement in revenue and sustained improved gross profit margins and compounding annuity revenue generated from starter packs, it said.
Blue Label generated R3.1bn in cash from operating activities in the interim period. It does not, however, declare an interim dividend.
Cell C plans to boost expenditure to R3bn this year as South Africa’s third largest mobile phone company hunts for acquisitions in the wake of a protracted recapitalisation by Blue Label Telecoms.
Spending fell to R1.2bn last year as the carrier was forced to put expansion on hold while the Blue Label deal was sewn up, CEO Jose Dos Santos said at a results presentation in Johannesburg on Tuesday. Cell C’s now in the process of making “several” acquisitions in the fibre market to add new services, the company said.
Cell C trails Vodacom and MTN in the South African market, though after the recapitalisation its debt fell by more than 70%. Earnings before interest, taxes, depreciation and amortisation soared by 151% in 2017 to R7.8bn, while sales rose 7%. — (c) 2018 Bloomberg LP
Blue Label Telecoms, the JSE-listed company that now owns 45% of Cell C, said on Thursday that it expects core headline earnings per share for the six months ended 30 November 2017 to double compared to the same period in 2016. The share surged more than 10% but pared its gains to 3% at the close of trading in Johannesburg.
Core Heps is likely to be between 93% and 113% higher, it said in a trading update to shareholders. Heps and basic earnings per share are expected to climb by similar amounts.
“The increase … is inclusive of the group’s share of an increase in a deferred tax asset recognised by Cell C and the consequent positive impact on group earnings,” it said. “The quantum of the increase in this asset amounts to R1.92bn, of which the group’s 45% share is R865m.”
Equities analyst Keith McLachlan said in an article on his website smallcaps.co.za after the trading update was published that Blue Label’s performance in the six months was robust and that the share price “could quite easily double” from current levels.
The acquisition of a 45% stake in Cell C for R5.5bn and the agreement to buy telecommunications specialist 3G Mobile make the latest numbers difficult to analyse, however.
Given that Cell C has incurred large historical losses, it has a big assessed loss for tax purposes, McLachlan said. “Now, given that there are likely future profits against which to set this assessed loss, the telco (Cell C) can now raise these assessed losses as a tax asset on its balance sheet. In short, Cell C is unlikely to pay tax for quite a long time to come, and this does in fact have value for shareholders.”
He said if one reverses the estimated 99c/share worth of deferred tax in the trading update, it suggests that Blue Label’s core Heps not did double but in fact dropped about 26%.
“This is bad, isn’t it?” McLachlan said. “Well, no, because we have only reversed the deferred tax asset and not controlled for Cell C’s equity accounted loss and the dilution from its investment. We need to do both to compare like with like.”
“In the acquisition of Cell C, Blue Label Telecoms issued shares to the effect of diluting shareholders by about 26.5%. Hence, if we then control for dilution, Blue Label Telecoms’ core Heps was flat year on year. But if you add back Cell C’s loss, you probably arrive at core profit growing by 15% to 25% year on year.”
McLachlan said such growth is “fantastic” for a stock trading on a “rather ridiculous” price-to-earnings multiple of an estimated 10 times (calculated using an annualised core Heps of 61c/share with Cell C’s tax asset stripped out and with no other adjustments).
“Blue Label Telecoms is a stock that is on a low multiple with a great growth rate and a game-changing stake in a telco. Quite simply, this is a stock that could easily double.”
Cell C is seeking acquisitions that will help transform South Africa’s third biggest mobile phone company into a full-service telecommunications provider offering Internet and financial services as well as traditional calls and texts.
The wireless carrier is working on two fibre-to-the-home deals and is looking at other targets in markets such as insurance, CEO Jose dos Santos said in an interview. The expansion will kick-start a new phase of development for Cell C after the company reduced debt by more than 70% in a recapitalisation by Blue Label Telecoms last year, he said.
“We are in the process of doing the right acquisitions and partnerships to be able to provide everything from content, insurance and possibly even financial services that all goes along with well-priced data and broadband services,” said Dos Santos. “We want to start generating different revenue streams.”
Dos Santos’s plans may help Cell C come out of the shadow of Vodacom and MTN, South Africa’s two dominant mobile phone companies. Having been mired in ownership talks for two years, Cell C’s subscriber numbers sit at about 16m, compared to more than 40 million for Vodacom, the country’s market leader.
“Cell C’s biggest problem was that they did not move quickly enough to become net profit positive,” Dobek Pater, managing partner of Africa Analysis, said by phone. The recapitalisation may enable the company to add more revenue streams and potentially find a new strategic or equity partner, he said.
South Africans living in cities including Johannesburg, Cape Town and Durban have been able to subscribe to fibre broadband since new companies including Vumatel and Vox entered the market from 2015. That’s increased both capacity and Internet speeds and enabled telecoms companies to introduce new services such as video on demand. While fibre currently runs to about 500 000 South African homes, it is estimated that less than 30% of those households have signed up for fibre services, according to Dos Santos.
In November, Cell C launched Black, an online streaming platform that the company expects to challenge more established providers, including MultiChoice, Showmax and Netflix. The company plans to add more channels including some showing live sport, and will consider bidding for related contracts such as English Premier League matches, Dos Santos said.
“We could have done a partnership but we wanted our own content,” said the CEO. Black can be played on any device and customers can use airtime to purchase content, a first in South Africa, he said. Customers also have the option to do a daily, weekly or monthly subscription.
“Going into 2018, we want to be able to offer you unlimited voice, fibre to your home, content and then maybe lets add on that insurance on your household goods and car, and so on,” Dos Santos said. — Reported with assistance from John Bowker, Antony Sguazzin and Gordon Bell, (c) 2018 Bloomberg LP
Communications regulator Icasa has found that Cell C followed due process during its recapitalisation, under which the JSE-listed firms Blue Label Telecoms and Net1 UEPS Technologies invested R7.5bn, the mobile operator said on Wednesday.
On 31 August, Icasa issued a statement saying Cell C may have failed to make the correct regulatory filings regarding the transaction.
Icasa said it appeared there had been non-compliance with “legislative provisions” and was “taking external legal advice on the matter, including on appropriate enforcement actions it can take to ensure compliance”.
“The authority has considered the notification and the preliminary view is that the Cell C recapitalisation transaction — on the face of it — triggers the provisions of section 13 of the Electronic Communications Act of 2005 and ought to have been filed as an application for change of control of the licensee,” Icasa said at the time.
Icasa’s move against the deal came days after Cell C’s black economic empowerment partner, CellSAf, again hit out at the recapitalisation, saying the restructuring was “non-compliant” and faced a number of “legal and regulatory hurdles”.
“Faced with regulatory and public scrutiny, the true motives and beneficiaries of the proposed transaction will be revealed. These revelations, combined with a series of violations of Cell C’s licence conditions and several South African laws and regulations, will likely capsize the deal, leaving its backers to rehabilitate their reputations and CellSAf to pick up the pieces at Cell C,” CellSAf said in a statement on 23 August.
It alleged the recapitalisation did not comply with various provisions of the Companies Act, the Electronic Communications Act and the Competition Act.
“The sponsors of the transaction have not complied with the mandated regulatory processes relating to changes in control of a licence, and they are therefore in breach of the specific requirements, regulated by Icasa,” CellSAf said.
Blue Label said previously that it had “disclosed everything that was required” of it in its various statements issued via the JSE’s stock exchange news service and in circulars to shareholders.
On Wednesday, Cell C said it welcomed “Icasa’s confirmation that it followed the correct process in the notification of its recapitalisation transaction and that it has complied with all applicable regulations”.
“A recapitalised Cell C is good for the industry, the economy and the consumer at large,” said CEO Jose Dos Santos. “The successful conclusion of this transaction has ensured a sustainable future for the company and its employees. We now have a solid foundation to really drive competition in an industry that has been marred by a duopoly at the expense of the consumer.” — (c) 2017 NewsCentral Media
Since the beginning of the year, Vodacom has delivered the best returns for shareholders among listed telecommunications shares, while Telkom has been a noticeable laggard, particularly since mid-2017.
Though Vodacom has performed best overall since 1 January, its share price movement has not been anything to get excited about: it has risen by less than 1%. However, MTN has fallen by 0.5% in the same time, while Telkom has plunged 28.6%.
Blue Label Telecoms, which recently acquired 45% in South Africa’s third largest mobile network, Cell C, has fallen 3.4% since the start of the year.
Over a five-year period, however, the picture is markedly different.
Here, Telkom is the star performer, climbing by 190.4%, even though the share has come off sharply since June, when it was up over 300%.
Telkom’s share climbed rapidly in 2013 and 2014 as then-new CEO Sipho Maseko began an aggressive turnaround, which included retrenching thousands of employees and restructuring the business.
It has drifted since 2015, but has come under significant selling pressure in recent months, in part due to government’s plan to sell some or all of its 39.3% shareholding.
Over five years, MTN has been the worst performer, declining by 23.5% — not surprising given its challenges in Nigeria, where it was fined US$1bn (down from an initial $5.2bn) for failing to disconnect more than five million Sim cards. MTN has faced operational challenges in South Africa, too.
Vodacom, MTN, Telkom and Blue Label Telecoms since the beginning of the year, based to 0 at the start. Chart by Google Finance
Vodacom, MTN, Telkom and Blue Label Telecoms over five years, based to 0 at the start. Chart by Google Finance
Vodacom, MTN, Telkom and Blue Label Telecoms over 10 years, based to 0 at the start. Chart by Google Finance
Over 10 years, MTN is still a poor performer, rising by just 1.3%. For those who’ve been invested for a decade, Vodacom is clearly the best performer. Listed since 2009, the company’s share price has appreciated by 170.5% in that time. Blue Label has risen by 102.4%, while Telkom — which sold its 50% stake in Vodacom in 2009 — has fallen by 70.3%.
The above performances do not take into account dividend payments made to shareholders. — (c) 2017 NewsCentral Media
Cell C has reported a 12% growth in the number of active subscribers on its network. The company had 15.7m active customers at the end of June 2017, up from 14m a year earlier.
At the same time, however, the mobile operator, South Africa’s third largest, has reported a net loss of R588m for the first six months of the year, compared to a R3m profit previously.
The net loss came despite an 11% increase in revenue to R7.7bn. Service revenue climbed by 12% to R6.3bn, while data revenue jumped 33% to R2.6bn. Data traffic year-on-year rose by 84%.
Average revenue per user was R75, unchanged from the year-ago six-month period.
Blue Label Telecoms, Cell C’s largest single investor with a 45% stake, published the operator’s interim financial results on its website on Thursday morning ahead of a planned investor roadshow.
Capital expenditure came in at R561m, a sharp decline from the R1.7bn the company spent in the first half of 2016. That number is likely to rise sharply following the recent recapitalisation of the business, which saw its interest-bearing debts reduced to R6.1bn, from about R23bn previously.
In the presentation, Cell C warned that it is still facing legal and regulatory challenges from empowerment shareholder CellSAf to the recapitalisation, in terms of which Blue Label invested R5.5bn for a 45% stake and Net1 UEPS Technologies invested R2bn for a 15% stake.
CellSAf has lodged a complaint with communications regulator Icasa, arguing that Cell C did not follow the correct processes.
“Based on the many and various detailed legal opinions from eminent senior counsel obtained by the parties to the recapitalisation, Cell C has in fact followed the correct process,” it said.
“Cell C has now made extensive written and oral submissions to Icasa providing details of the structure and effect of the transaction. We are awaiting Icasa’s decision as to whether to accept Cell C’s position or to refer the matter to the complaints and compliance committee for adjudication.”
CellSAf has also lodged a complaint with the Competition Commission and filed papers in the high court. “The recapitalisation is not a merger within the meaning of the Competition Act. Despite this, CellSAf has laid a complaint with the commission that Cell C has not obtained approval… Cell C has now made an extensive submission to the Competition Commission to explain the factual and legal position as to why this is not a notifiable merger.” — (c) 2017 NewsCentral Media
Although Cell C will avoid getting involved in a capital expenditure war with rivals MTN and Vodacom, it will build South Africa’s best urban 4G/LTE network, Blue Label Telecoms co-CEO Brett Levy said on Tuesday.
Levy, who was speaking at an investment conference in Sandton arranged by Huge Group and the Wits Business School, said Cell C — in which his company recently acquired a 45% stake for R5.5bn — “will build the best 4.5G/LTE network that this country can offer”.
“We will have an exceptional 4.5G/LTE network, and when you step outside the network, you will roam. We have a great roaming deal with Vodacom. And if Vodacom has the best network, I have the best network.”
He said it doesn’t matter that Vodacom and MTN far outspend Cell C on capex each year, because the company will focus its efforts on urban areas and leave coverage in rural areas to roaming partner Vodacom.
“Cell C is not getting involved in a capex war,” Levy emphasised. “Every single year, MTN and Vodacom spend R8bn to R11bn; you can’t get into that (space).”
However, through infrastructure and spectrum sharing deals, which he said are “coming”, Cell C will be able to punch above its weight. “Capex is about focus. You can’t be everything to everybody. We will still spend R2.5bn to R3bn/year. It’s a good amount. We will focus on urban and LTE…”
He said Cell C will work to improve its operating margins to be closer to those enjoyed by Vodacom and MTN. “We will get a much more respectable level.”
He said the mobile operator doesn’t want to become the first or even the second biggest player in the market. But it will grow its service revenue market share from around 12-13% today to closer to 17-18% in a few years’ time.