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Blue Label's Cell C takeover gets SA CompCom approval

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South Africa's Blue Label Telecoms has received approval from the country's Competition Commission to take control of SA telecom operator Cell C, which it is already a major shareholder in.

South Africa's Competition Commission (CompCom) on Tuesday recommended that the Competition Tribunal approve a proposed transaction whereby Blue Label subsidiary The Prepaid Company (TPC) intends to acquire a controlling stake in Cell C.

The CompCom said the transaction "does not raise public interest concerns," but its approval came with some conditions.

"The Commission has recommended that the Tribunal approves the merger subject to conditions to mitigate information exchange concerns, and conditions ensuring the continued use of certain prepaid airtime distribution channels for a period, post-merger," the CompCom said in a statement.

TPC is a wholesale distributor of prepaid telecommunication products – including prepaid airtime and SIM cards – and TPC purchases these products from South African mobile operators, including Cell C, and sells them on to distributors, merchants and retailers.

Cell C also sells its own prepaid airtime directly to dealers, retailers and end-consumers through the Cell C app and its retail stores.

Blue Label wants a controlling stake

In February 2023, Blue Label said it had intentions to take a controlling stake in Cell C so it could have more impact on the operator's strategy going forward.

Blue Label first bought a 45% stake in Cell C back in August 2017. After a recapitalization in September 2022, it now owns 49.53% of the operator but is looking to push its ownership above 50%.

In December 2023, Cell C applied to the Independent Communications Authority of South Africa (ICASA) to have its telecom licenses transferred to Blue Label. However, Cell C later explained that this was more of an obligatory governance requirement, due to the majority ownership change, and Cell C would still own and control its license going forward. Cell C's spectrum licenses will also not be transferred to any party.

In February 2024, during Blue Label's half-year results presentation, joint CEO Brett Levy said that Blue Label had made applications to both the Competition Commission and ICASA over the majority ownership change and said he hoped to get approvals in the next six months.

Cell C's struggles

Cell C has faced significant financial challenges over the past few years and has been working to reduce its debt and stabilize the company. The operator decided to shift its focus away from spending money on infrastructure and rather become a wholesale buyer of network capacity and infrastructure services.

In early 2021, it began migrating its customers to roam on partner networks MTN and Vodacom, with plans to sell of its tower portfolio.

Cell C made a strategic decision to no longer invest in tower infrastructure and rather become a wholesale buyer of capacity and services from other SA operators.   (Source: wirestock on Freepik)
Cell C made a strategic decision to no longer invest in tower infrastructure and rather become a wholesale buyer of capacity and services from other SA operators.
(Source: wirestock on Freepik)

In June 2023, Cell C said its entire network had been migrated to partner towers and it had deactivated its physical tower and radio access network (RAN).

For almost a decade, Cell C was South Africa's third biggest mobile operator but Telkom SA's growth in the mobile market saw its users surge past Cell C's for the first time in 2020.

At the end of December 2023, Cell C was sitting firmly in fourth place with around 13.35 million mobile users compared to almost 18.6 million for Telkom SA, according to statistics from market research company Omdia.

Meanwhile, Vodacom led the market with 59.3 million users and MTN was second with 37.4 million mobile subscribers.

Related posts:

*Top image source: Cell C.

— Paula Gilbert, Editor, Connecting Africa

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