Blue Label Telecoms will move to take a controlling stake in Cell C before the year’s end, after a recapitalisation of the mobile operator’s balance sheet a year ago.
This is according to co-CEO Brett Levy, as the prepaid group reported full-year earnings to May.
“Definitely, yes. There’s a process to apply to the Competition Commission,” Levy said on Wednesday. “We have been working on it and we will definitely apply to the commission this year. From then on, it’s a guess of how long it will take. As you know, it can take six months or it can take two years. We’ll keep the market updated, but that’s definitely the intention.”
Blue Label, Cell C’s largest shareholder, completed the long-awaited recapitalisation of the troubled mobile company in September 2022. SA’s fourth-largest mobile network operator has struggled to make a profit since it opened for business in 2001.
It had been laden with long-term debt of R8.7bn, prompting Blue Label and Lesaka Technology (formerly Net1), which previously had a 15% stake, to write down their combined R7.5bn investment to nil.
Four years after this writedown, the prepaid specialist positively revalued the Cell C investment on its books to R962.5m, as it reported in its interim earnings in February.
Levy said the move would affect Blue Label more than Cell C, explaining that the prepaid company needs permission from the Independent Communications Authority of SA for a change in ownership and the Competition Commission making a determination of competition matters.
“Nothing will change for Cell C, but it will change Blue Label’s life because today we get the brunt of the performance of Cell C but we don’t have any control over Cell C. The shareholding that we have is like a no-man’s land.”
Since the recapitalisation, Blue Label has increased its shareholding to 49.53%.
“Blue Label can’t remain in this position. It either has to sell down or it has to move into a position where it can actually get involved in the day-to-day and on the strategy. It’s not our intention to sell down. It’s our intention to get control,” Levy said.
The group, which specialises in selling prepaid airtime, electricity and ticketing, reported that revenue rose by R1.1bn to R18.9bn, amounting to growth of 6% for the past financial year. Including PIN-less top-ups, prepaid electricity, ticketing and gaming, which are recognised as revenue on imputing gross revenue, the effective growth in revenue was R4.5bn, or 6%, to R76.8bn.
Blue Label said core headline earnings for the period amounted to R402m, translating to 45.55c per share. In the previous comparable period, core headline earnings amounted to R1.061bn.
The drop in earnings was largely due to the recapitalisation of Cell C. Given that Blue Label has written up the value of Cell C, it has had to recognise losses incurred by the mobile operator in the intervening period since the write-off in 2019. These losses had gone unrecognised because the value of Cell C was written down to zero.
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