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In an unusual move the board of a key Cell C shareholder, 3C Telecommunications, ratified a resolution last month that granted exiting Oger Telecom directors a blanket indemnity.
3C Telecommunications has a 30% stake in Cell C and this is its sole asset.
“The company hereby indemnifies the resigning directors against all loss, costs, liability and damage … which the directors may suffer as a result of, or which may directly or indirectly be attributable to the actions taken by the parties in their capacities as directors of the company,” the resolution, seen by City Press, reads.
The resolution didn’t make clear why there was a need to indemnify the directors.
Over the last 17 years, Cell C has invested billions of rands in challenging its two major local rivals, MTN and Vodacom, and battled to turn a profit.
At the end of December 2017, Cell C’s accumulated losses stood at R21.7 billion.
Earlier this year, S&P Global Ratings downgraded Cell C to CCC+, which is seven notches below investment grade, from B- due to concerns about the company’s liquidity position being “more vulnerable”.
CellSaf director Zwelakhe Mankazana said the three resolutions to cover the resignations of the Oger Telecom directors, including the indemnification and the replacement with the Cell C directors, was implemented on August 27. However, Candice Jones, a Cell C spokesperson, said the resolutions did not take place on 27 August.
“CellSaf instructed its attorneys to oppose the indemnity as we don’t believe it is warranted,” he said.
Empowerment company CellSaf has a 25% stake in 3C Telecommunications.
Oger Telcom held a 45.6% stake in 3C Telecommunications after last year’s recapitalisation, Mankazana said. CellSaf has vigorously opposed the recapitalisation and it has lodged objections with the Competition Commission, Independent Communications Authority of SA and the high court.
Mankazana said Oger Telecom and its parent company Saudi Oger were in effect bankrupt as of December 2015 and it was the recapalisation deal last year that brought in Blue Label Telecoms and Net 1 UEPS Technologies, which gave Oger Telecom the ability to get cash out of its investment in Cell C. Blue Label Telecoms has a 45% stake in Cell C.
A Johannesburg lawyer, who is familiar with the Companies Act, said that it was “quite unusual” to put an indemnity in place when a company director or directors was leaving the board of company, especially when no such indemnity was in place before.
It was more usual for an indemnity to be granted to company directors at the point when they joined board, he added.
Another related 3C Telecommunications resolution approved the resignation of 11 directors associated with Oger Telecom, which is part of the Saudi Oger group, which is headquartered in Saudi Arabia.
The 11 directors who resigned from the 3C Telecommunications board include: Oger Telecom Chief Legal Officer and Deputy Chief Executive Officer Mazen Abau Chakra and CEO at Saudi Oger Saad-Eddine Rafic Al-Harir, who is the prime minister of Lebanon.
These Oger Telecom directors were replaced by 10 Cell C directors on 3C Telecommunications board, including Cell C CEO Jose Dos Santos and Cell C acting chief financial officer Robert Pasley.
When Cell C was launched in 2001, Oger Telecom had a 60% stake in the company.
On Friday its share price fell to R5.03, its lowest level in many years. In the past year Blue Label’s share price has dropped by 70%. It would appear that in August this year, Oger Telecom directors exited the 3C Telecommunications board, Mankazana said.
It was not clear if Oger Telecom still held its stake in 3C Telecommunications, he said.
Cell C’s Jones said that: “Once again it appears, CellSaf, the empowerment partner of our former shareholders, Oger Telecom, are attempting to undermine the sustainability of Cell C. Oger Telecom directors resigned and the shareholders in 3C Telecommunications, which were entitled to appoint replacement directors, have done so according to the relevant processes. Indemnifying outgoing board members is common practice.”
