Shareholder alleges Cell C running at a big loss: report

·24 Mar 2016

One of Cell C’s biggest shareholders has initiated legal proceedings to hamper a recapitalisation process with Blue Label Telecoms, according to a report by BDLive.

CellSaf – an empowerment group which holds a 25% stake in the telco group – has reportedly handed in court documents seeking to have Cell C parent company 3C Communications liquidated.

Blue Label Telecoms is set to purchase a 35% stake in Cell C for R4 billion. As part of the deal, 3C Telecommunications will put money into the company to reduce debt and will retain a 35% stake in South Africa’s third largest operator.

The mobile operator’s management and staff will own the remaining 30% of the company.

According to BDLive, CellSaf executive Solomon Mankazana is alleging that 3C Telecommunications is “both financially and commercially insolvent, and is unable to pay its debts”.

He said 3C was trading recklessly and fraudulently, that 75% of the share capital had been lost, and that liabilities exceeded assets by about R15 billion.

The executive said CellSaf had not seen verified or audited financial statements for the group, and that the company operated under a veil of secrecy.

According to Business Day, CellSaf estimates that Cell C made an operating loss of R2.3 billion in the 2014 financial year, and a loss of R3.8 billion for 2015.

Majority stakeholder, Oger Telecom, contended the application, saying it held no merit, and that only certain people within CellSaf were pushing this agenda for in their own interests.

The group said the court application would be detrimental to the majority of CellSaf shareholders in the end.

Cell C CEO, Jose Dos Santos contended in September last year, that the company was making a month-on-month profit, and had been for several quarters already.

He said that the company had just shy of 22 million customers.