In­jec­tion bright­ens Cell C’s out­look

The Star Early Edition - - NEWS - Sandile Mchunu

MO­BILE op­er­a­tor Cell C’s cash in­jec­tion from Net 1 and Blue La­bel Tele­coms on Tues­day re­ceived a thumbs up from the mar­ket with rat­ings agency Moody’s re­vis­ing the com­pany’s out­look from “de­vel­op­ing” to “pos­i­tive”.

Post and Telecom­mu­ni­ca­tions Min­is­ter Siyabonga Cwele de­scribed the com­pany’s change in for­tunes as a breath of fresh air.

Mer­gence In­vest­ment Man­agers’ port­fo­lio man­ager, Peter Takaen­desa, said the move would sig­nif­i­cantly re­duce Cell C’s net debt from R23 bil­lion to less than R6bn and take the com­pany to a rel­a­tively sus­tain­able po­si­tion over the mid term.

Takaen­desa said the in­jec­tion would give share­hold­ers an op­por­tu­nity to map out a clear strat­egy to ad­dress Cell C’s com­pet­i­tive dis­ad­van­tage against its dom­i­nant ri­vals and sup­port the com­pany through the trans­for­ma­tion from a small to a sig­nif­i­cant player in the telecom­mu­ni­ca­tions in­dus­try.

“The bal­ance sheet has been re­paired and it is now up to find­ing cap­i­tal to fund its growth. The new di­ver­si­fied share­holder base will also help ma­te­ri­ally in case the com­pany will re­quire a fur­ther cap­i­tal in­jec­tion over the mid-longer term,” Takaen­desa said.

“Cell C has been burn­ing cash for over a decade and con­tin­u­ing to op­er­ate the same way it has done will not change its for­tunes.”


Cell C re­ceived a ma­jor cash boost on Mon­day when Net1 UEPS forked out R2bn for a 15 per­cent stake in the com­pany. The trans­ac­tion came just days af­ter Blue La­bel Tele­coms share­hold­ers ap­proved the pur­chase of a 45 per­cent stake in it for R5.5bn. Cell C said the deals would also al­low black peo­ple to have a 44.51 per­cent share­hold­ing within 12 months and be fully owned by South African in­vestors.

Moody’s said the pos­i­tive out­look as­signed cap­tured the steps the com­pany had taken to im­prove its cap­i­tal struc­ture.The rat­ing agency, how­ever, was quick to point out Cell C’s liq­uid­ity po­si­tion re­mained weak. Takaen­desa said the rat­ing was un­likely to have a ma­te­rial im­pact on the busi­ness in the near term as Cell C had al­ready raised the cap­i­tal re­quired to sta­bilise the busi­ness.

“How­ever, fur­ther up­grades could help re­duce their cost of fund­ing over the mid-longer term. Tele­coms is a cap­i­tal in­ten­sive busi­ness and the new share­hold­ers will have to closely mon­i­tor that the credit rat­ing keeps im­prov­ing to fund fur­ther cap­i­tal re­quire­ments at a rea­son­able cost,” he said.

Cwele said the in­vest­ments had saved 2 500 di­rect and 15 000 in­di­rect jobs in ar­eas such as dis­tri­bu­tion and sup­pli­ers.

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