Blue Label gets funding for Cell C

After more than two years, Blue Label Telecoms says it has secured funding from various banks to recapitalise Cell C. The prepaid specialist is the biggest shareholder in the cellular phone provider, which is laden with long-term debt of R8.7bn.

After more than two years trying, Blue Label Telecoms says it has secured funding from various banks to recapitalise mobile operator Cell C.

Blue Label, which specialises in selling prepaid airtime, electricity and ticketing, is recapitalising Cell C, SA’s fourth cellular phone provider, which has struggled to make profits since it opened its doors in 2001 and is laden with debt of R8.7bn.

The prepaid specialist is Cell C’s largest shareholder with a 45% stake, and the cellular phone company’s debt burden saw it and Net1, which owns 15%, write down their combined R7.5bn investment to nil.

On Thursday, Blue Label said it has concluded “a term sheet for an airtime purchase transaction” with Investec, Rand Merchant Bank and other financiers, “the proceeds of which are intended to be utilised for the recapitalisation of Cell C”.

At a media briefing, co-CEO Brett Levy said: “Blue Label and the funders have come to terms. The money has been secured but it’s subject to the conditions precedent and long-form agreements, normal stuff for a deal of this nature.”

Blue Label has not disclosed how much the transaction is worth and how it will be structured. Levy simply said more

time”.“details will follow in

With conditions still to be met to fully conclude the recapitalisation, the mobile operator said “this is a positive step for Cell C’s recapitalisation and is a part of the overall process and structure of a possible transaction”.

Blue Label reported growth in earnings of almost a third for the full year to May, driven in part by the sale of its Mexican unit and closure of a retail unit. Revenue generated from continuing operations declined 11% to R18.8bn, from R21.1bn before.

Earnings per share were 94.55c for the period, up from 67.34c, of which 91.67c related to continuing operations and the rest to discontinued operations.

The company says the increase in earnings is primarily attributable to the disposal of its 47.56% interest in Blue Label Mexico. In 2020, Blue Label Telecoms sold its stake in the Mexico-based company for $11.5m (about R188m at the time) to focus on its SA businesses.

Blue Label’s earnings performance was helped by the partial recovery of losses in closing retail unit WiConnect which sold smartphones, tablets, gadgets, accessories, airtime, data, event and bus tickets after months of inactivity due to Covid-19.

Core headline earnings for the year amounted to R788m, equating to 89.65c per share. Of this, R763m related to continuing operations and R25m to discontinued operations. In the prior year, core headline earnings were R562m: 62.71c per share.

The group acquired the remaining 52% shareholding in Glocell Distribution a supplier of electricity comprising hundreds of local municipalities for R137m from its partners.

Borrowings were reduced to R1.7bn from R2.3bn, while net cash generated from operations grew from R1.3bn to R1.5bn.

Shares in Blue Label up 108.96% over the past 12 months —were 2.37% weaker at R5.76. The firm is valued at R5.33bn.