The Competition Commission has given the green light for Blue Label Telecoms to take a controlling stake in SA’s fourth largest mobile operator, Cell C.
In 2023, Blue Label began a process of taking control of the cellphone provider with plans to move from a 49.53% stake to about 53%, with requisite applications having been made to local authorities.
On Tuesday, the commission — which investigates matters of competition in the country — recommended that the Competition Tribunal “approve the merger subject to conditions to mitigate information exchange concerns, and conditions ensuring the continued use of certain prepaid airtime distribution channels for a period, post-merger”.
The tribunal has the final say on competition matters in SA.
As Cell C’s largest shareholder, Blue Label completed the long-awaited recapitalisation of the troubled mobile company in September 2022. The mobile network operator has struggled to make a profit since it opened in 2001.
It had been laden with long-term debt of R8.7bn, prompting Blue Label and Lesaka Technologies (formerly Net1), which previously had a 15% stake, to write down their combined R7.5bn investment to nil.
Four years after this write-down, Blue Label said in February 2023 it had revalued the Cell C investment on its books to R962.5m.
The group, which specialises in selling prepaid airtime, electricity and ticketing, holds its Cell C stake in subsidiary TPC, a wholesale distributor of prepaid telecommunication products, including prepaid airtime, postpaid airtime/contracts, SIM cards, and entry-level handsets.
TPC purchases these mobile network products from mobile network operators and sells them on to downstream distributors, merchants, and retailers.
The move to take control has had its share of controversy with Blue Label getting into a public spat with BEE shareholder CellSAf, which once owned 25% of Cell C, earlier in 2024.
At the time, CellSAf accused Blue Label of working to strip Cell C of valuable assets such as its spectrum, thought to be worth as much as R7.8bn.
In February, Blue Label reported its group revenue declined by 23% or R2.2bn to R7.6bn. However, because only the gross profit earned on “pinless top-ups”, prepaid electricity, ticketing and universal vouchers is recognised as revenue, the effective growth in revenue translated to R4.5bn, an increase of 12%.
Pinless revenue refers to revenue from “top ups” in transactions including for airtime or prepaid electricity, when users do not have to enter a pin.
Total revenue was R43.8bn compared with R39.3bn previously, while gross profit grew 4% to R1.6bbn. Core headline earnings amounted to R420m, or 47.15c a share.
That excludes a contribution of R65m in the current period and a loss of R421m in the prior period, primarily resulting from the recapitalisation of Cell C. With those amounts included, core headline earnings per share declined by 23% to 39.90c compared with 51.72c a year earlier.
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