Net1 aims to leverage its investments in Cell C and DNI-4PL Contracts to create new packages for mostly unbanked subscribers that go beyond telephony to include financial and transactional services, according to a statement issued by the group.
Net1 has completed its 15% investment in Cell C and 45% investment in DNI-4PL Contracts.
Cell C has more than 15-million active mobile subscribers, and DNI is the leading distributor of mobile subscriber starter packs for Cell C, while also distributing prepaid airtime through its extensive network of field operatives and agents.
According to the statement, Net1’s mission has always been to provide a transaction processing solution for the unbanked and under-banked populations of developing economies, enabling those who generally have limited or no access to a bank account, to enter affordably into electronic transactions with each other, government agencies, employers, merchants, and financial services providers.
The investments in Cell C and DNI are consistent with Net1’s approach of leveraging its significant and established infrastructures, and pursuing strategic acquisition opportunities or partnerships to gain access to new markets or complementary products.
Net1, Cell C and BLT have identified the need to offer customers a bespoke, affordable and comprehensive package that will go beyond basic telephony. An integrated mobile-based digital product will therefore likely differentiate the offerings of all the relevant stakeholders in this transaction including Net1.
The Cell C and DNI investments allows the group to address the needs of the broader South African population by owning the value chain including the network, payment, product, distribution and hardware.
“We are delighted to have finally concluded the investments in Cell C and DNI, and look forward to the exciting prospects that lie ahead for each of our organisations,” says Herman Kotze, CEO of Net1. “Our technology, products and logistical capabilities, together with Cell C’s innovative mobile competencies and customer base, and DNI’s distribution network provide an ideal opportunity to deliver a comprehensive suite of mobile, transacting and financial services to a large part of the South African population.
“Over the past two years, Cell C’s management has built a demonstrable track record of navigating through a challenging environment while reinvigorating growth.
“Along with Blue Label, we are proud to have been a part of the vital recapitalization process, which has cleared the way for the continued exponential growth of the business,” he adds.
“The conclusion of our recapitalization with the introduction of key strategic partners like Net1 and Blue Label, sets Cell C up to be a disruptor in the traditional mobile market in South Africa,” says José Dos Santos, CEO of Cell C. “With Net1’s products, logistical expertise, technology and rural footprint, along with distribution platforms of Blue Label and DNI, we are confident of picking up a significant amount of share in an otherwise relatively stagnant industry,” he adds.
Net1 has acquired a 15% direct interest in the issued share capital of Cell C for a consideration of R2-billion ($151-million based on exchange rates as of 1 August 2017).
The purchase consideration was settled using a combination of R750-million ($57-million) in cash and R1,25-billion ($95-million) in debt. The debt facility provided by RMB and Nedbank is a two-year straight-amortizing facility with quarterly repayments and an interest rate of JIBAR + 2,75% (approximately 10% per annum at current rates).
In terms of the subscription agreement, Net1 has the right to nominate two directors to the board of Cell C.
Net1’s investment in Cell C forms part of the larger recapitalisation plan for Cell C, which has resulted in Cell C’s net indebtedness being reduced from approximately R19,5-billion ($1,47-billion) to less than R6-billion ($453-million).
Net1 has acquired a 45% direct interest in the issued share capital of DNI for a consideration of R945-million ($72-million). The purchase consideration was settled utilising existing cash reserves.
Under the terms of the transaction, Net1 is obliged to pay DNI an additional amount not exceeding R360-million ($27-million) in cash, subject to DNI achieving certain performance targets. Net1 has a two-year option to acquire a further 10% interest in DNI.
Commenting on the recapitalisation of Cell C, Minister of Communications Ayanda Dlodlo comments: “We recognise that the cost to communicate is too high for the majority of South Africans and government would like to see this reduced significantly, including the cost of data. To support the broadening of access to information for all our citizens, it is imperative to intensify competition in the South African telecommunications industry.”
