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The facts about the application to increase The Prepaid Company's shareholding in Cell C.

Tuesday, 9 January 2024

Cell C and The Prepaid Company (TPC) have applied to the applicable regulatory authorities for the regulatory approvals required to increase TPC's shareholding in Cell C from 49.53% to 53.57%.  
 
The increase in shareholding by TPC is in the best interest of Cell C and all its stakeholders (customers, employees, and shareholders) as it is a strategic decision aimed at further enhancing the long-term sustainability and growth prospects of Cell C. Cell C, as a mobile network operator, will continue to operate as a licensee providing mobile services to its customer base as part of its operating model.

The transaction is a change of shareholding (of TPC in Cell C) from a non-controlling 49.53% to a controlling 53.57%. To comply with applicable legislation, this change in shareholding necessitates two regulatory applications:

  1. Electronic Communications Act, 2005

Cell C is required in terms of sections 13 and 31(2A) of the Electronic Communications Act, 2005 to obtain the Independent Communications Authority of South Africa’s (ICASA) prior approval for the transaction.

When a licensee's shareholding changes from a non-controlling to a controlling interest by a single shareholder, that results in a transfer of control of the licensee for which ICASA's approval must be obtained. The service and spectrum licences (and the underlying spectrum) will however continue to be held by Cell C, even after TPC has acquired the controlling interest.

The ICASA notice published in the Gazette on 6 December 2023 reflects compliance with this regulatory requirement.

  1. Competition Act, 1998

Both TPC and Cell C are required in terms of Section 13 of the Competition Act, 1998 to obtain the Competition Tribunal’s prior approval for the transaction, following an investigation and recommendation by the Competition Commission into the competition and public interest effects of the proposed transaction.

Both the above regulatory applications have been lodged with the relevant authorities and are under consideration.

It is also important to point out the following:

Cell C has undergone two recapitalisation processes in the past eight years. On both occasions the shareholders have supported Cell C. TPC, as one of the largest shareholders in Cell C, has made a substantial investment in Cell C and continues to provide much needed financial support.  TPC's increase in shareholding is a clear demonstration of the ongoing investment that it has made in Cell C and its firm commitment and belief that Cell C will rebuild its market share in a sustainable manner, and continue operating as a mobile network operator, serving its customers and being a meaningful competitor in the telecommunications industry.

The approval of the transaction is important as it will benefit Cell C and its stakeholders (customers, employees, and shareholders) resulting in a more sustainable, viable and pro-competitive Cell C that is better able to serve its customers and grow its market share in a sustainable manner.

The mobile telecommunications industry will benefit from effective and thriving competition, which ultimately is positive for the consumer.

TPC fully supports Cell C’s customer centric strategy and the lead by new management to execute on a capex-light model, delivering world class service to all South Africans in pursuit of its vision of connecting people and changing lives.

Both Cell C and TPC are committed to transparency and compliance with all applicable laws and regulations.

The outcome of the process will be made public by ICASA and the Competition Commission in due course.



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