Blue La­bel go-ahead for its Cell C bid

3G Mo­bile deal also gets green light

The Star Early Edition - - COMPANIES & NEWS - Sandile Mchunu

BLUE La­bel Tele­coms share­hold­ers, with the ap­proval of two deals worth R7.4 bil­lion, is ce­ment­ing its tele­coms po­si­tion.

This as Blue La­bel yes­ter­day com­pleted its bid to buy a 45 per­cent stake in Cell C for R5.5bn, through its whol­ly­owned sub­sidiary, The Pre­paid Com­pany. Blue La­bel share­hold­ers last week also gave the green light for its R1.9bn deal to ac­quire a 47.37 per­cent stake in 3G Mo­bile.

Now that the deal has fi­nally re­ceived the green light, the com­pany has taken an im­mense step for­ward in its growth strat­egy by trans­form­ing its busi­ness model into a ver­ti­cally in­te­grated tele­coms group.

Blue La­bel joint chief ex­ec­u­tive Brett Levy said: “This trans­ac­tion is the most sig­nif­i­cant in Blue La­bel’s his­tory and marks a mile­stone for the group’s strat­egy.

“As a sup­plier and dis­trib­u­tor to Cell C, we have al­ready iden­ti­fied mul­ti­ple syn­er­gies in the pro­cure­ment chain, dis­tri­bu­tion net­work and pro­vi­sion­ing of prod­ucts and ser­vices.”

The group said as a re­sult of the re­cap­i­tal­i­sa­tion plan, Cell C’s net bor­row­ings would be re­duced be­low R6bn, plac­ing Cell C in a stronger po­si­tion to com­pete on the con­sumer front.

Cell C has main­tained ex­cep­tional growth and cur­rently boasts more than 12 mil­lion cus­tomers.

Peter Takaen­desa, a port­fo­lio man­ager at Mer­gence In­vest­ment Man­agers, said the trans­ac­tion was pos­i­tive for Cell C as it gave them a stronger bal­ance sheet to sus­tain their op­er­a­tions for at least the medium term.

“How­ever, they will have to ex­e­cute ex­cep­tion­ally well to gain mar­ket share in a sat­u­rated lo­cal mo­bile tele­coms mar­ket or else the trans­ac­tion will amount to kick­ing the can down the road.”

He said it re­mained to be seen if Blue La­bel had al­lo­cated its cap­i­tal to the best op­por­tu­nity.

Blue La­bel also needed to make sure it did not sour its im­por­tant dis­tri­bu­tion re­la­tion­ships with Vo­da­com and MTN as it was now also ef­fec­tively a com­peti­tor to them,” Takaen­desa said.

Blue La­bel said its com­mer­cial con­tracts with all other mo­bile net­works would re­main un­changed. It has con­tin­ued to look for op­por­tu­ni­ties and at the end of June it an­nounced its in­ten­tion to ac­quire 47.37 per­cent of 3G Mo­bile, one of Africa’s largest mo­bile distrib­u­tors, for R1.9bn.

The share­hold­ers also gave the deal a go-ahead last week.

Mark Levy, a joint chief ex­ec­u­tive, said the ac­qui­si­tion of 3G Mo­bile aligned per­fectly with Blue La­bel’s strat­egy of pro­vi­sion­ing prod­ucts and ser­vices to any chan­nel and any cus­tomer, through a myr­iad of pay­ment op­tions.

“Our strat­egy takes an­other step for­ward with the ac­qui­si­tion of 3G Mo­bile. Of the R1.9bn pur­chase price, R900 mil­lion was set­tled as to R250m in Blue La­bel shares, plus R650m in cash, while the re­main­ing 52.63 per­cent tranche will be set­tled in R1bn cash,” Levy said.

Blue La­bel shares were 0.6 per­cent lower on the JSE yes­ter­day to close at R16.60.

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