Cell C contracts ‘remain intact’

Cell C’s airtime contracts with MTN and Vodacom remain intact.

It’s been a busy week for Blue Label – organising billions in recapitalisation for Cell C, publishing results and putting out gossip fires.

Prepaid specialist Blue Label Telecoms has assured investors Cell C’s airtime distribution contracts with MTN and Vodacom remain intact, as does its shareholding structure, after a massive debt restructuring.

Blue Label’s joint CEO Mark Levy says it will be “business as usual” after the recapitalisation, which will see Blue Label inject R5.5 billion for a 45% stake in Cell C. The deal is expected to be wrapped up in June.

Dousing fires

Blue Label was responding to rumours that Vodacom and MTN would terminate their airtime distribution services with SA’s third-largest mobile operator.

Levy’s brother and joint CEO Brett said the Vodacom deal still had four-and-a-half years to run.

“We never got a letter from Vodacom to say that we are breaching our contract [by going into a deal with Cell C] and [that] they are cancelling.

“In the world of MTN, we have signed a new contract. Blue Label is a neutral aggregator of products and services because it’s the model of what we do,” said Levy.

The company on Tuesday unveiled its results for the six months to November 2016, in which it reported a 25% rise in its gross profit to R1.1 billion on the back of 3% rise in revenue to R13.2 billion. It grew its headline earnings per share by 52% to 82.86 cents per share.

Blue Label made progress on Cell C’s recapitalisation on Monday, as it reached an eleventh-hour agreement that will see the mobile operator’s bondholders convert their debt into equity. The agreement involves debt providers, including Nedbank, the Industrial and Commercial Bank of China, China Development Bank, euro bondholders and an unnamed third investor that will invest R2 billion for a 15% stake.

It later emerged the unidentified third investor is Net1 UEPS Technologies. It said in a SENS announcement yesterday it would be paying R2 billion for its stake.

A successful conclusion of Cell C’s recapitalisation will see it reduce its debt load from R23 billion to R6 billion.

Cell C’s delayed recapitalisation has seen its corporate credit rating downgraded to the junkiest of junk by S&P Global Rating last month after it missed interest payments in January on its €400 million senior secured bonds that are due in 2018.

ICT research analyst at Frost & Sullivan Mauritz Venter, said the signing of the agreement will go a long way in allaying concerns around Cell C’s predicament.

Brett Levy ruled out big changes to Cell C’s shareholding structure. Blue Label will hold 45%, Net1 UEPS will hold 15%, 30% would be held by Oger Telecom and 10% might be held by management and staff (it’s yet to announce and confirm this).

BEE brightens

But Levy said staff and management might be allocated stakes of above 30% as Oger Telecom could potentially relinquish a portion of its shares.

The BEE partner is CellSaf, which owns a 25% stake in Cell C’s holding company.