Investors hope for lowdown on Cell C refunding

South Africa's third-biggest mobile operator, Cell C, is expected to reveal its restructured shareholding when it posts annual results on Tuesday.

It is hoped this will settle the status of BEE investor CellSaf, which has had 25% of the perennially unprofitable company since its founding 16 years ago.

The announcement will also reveal whether staff will be able to benefit through an allocation of stock in Cell C's recapitalisation endeavours. Blue Label Telecoms and Net1 UEPS have committed to inject a total of R7.5-billion into the company, in exchange for a combined 60% share in Cell C.

As part of the recapitalisation, which the mobile operator needs to remain a going concern, investors have agreed to swap the R23-billion they are owed for shares in the company.

Should the transactions be successfully concluded, the investment of CellC investors through 3C Telecoms - 75% owner Saudi Oger and 25% investor CellSAF - will be diluted heavily, a prospect CellSaf has vigorously opposed.

Cell C has not made a profit since 2001, nor has it ever paid a dividend. Company sources say its financial situation is so dire that it has received several bailouts from a service provider.

CellSAF, led by politician Matthews Phosa and businessman Zwelakhe Mankazana, has vowed to derail the deal.

But investors may have no choice. Cell C was on the brink of being placed under business rescue when its biggest lender agreed to the recapitalisation programme. A company under business rescue gets a reprieve from servicing supplier obligations, but may not access credit.

The company's debtors were initially reluctant to agree to the recapitalisation programme and approached companies such as Telkom for a deal that would ensure they get their money back.

The recapitalisation is expected to reduce Cell C's debt to R6-billion and boost business.

Business Times understands that Industrial and Commercial Bank of China, the largest lender to Cell C, agreed to the recapitalisation deal at the last minute.

Cell C's spokeswoman Karin Fourie did not directly comment on its bid to avoid business rescue, saying only that "recapitalisation is critical to ensuring Cell C's sustainability".

Nedbank and ICBC were not equity members and would remain lenders of the company, she said.