Blue Label is considering spinning off Cell C as part of the group’s restructuring in a move that will see all four of SA’s largest telecom companies listing on the local bourse.
The current listed players are worth more than R500bn on the JSE.
News of the proposed restructuring sent Blue Label’s shares up 11.61% — the highest daily gain in nearly 10 years.
Cell C, SA’s fourth-largest mobile network operator, has long harboured ambitions of going public — a plan first floated by former CEO Jose dos Santos in 2018.
However, this plan came to nought as the company struggled to make a profit — making its initial public offering a challenging prospect for investors.
However, Blue Label, which is Cell C’s largest shareholder, says the mobile operator has turned the corner and a listing might unlock further value in the business.
Blue Label said it is eyeing listing Cell C on the prime segment of the JSE — an indication that places multibillion-rand valuation on the mobile operator.
The JSE last year split its main board into two segments tailored to meet the needs of large corporations and smaller firms.
The main board was divided into “prime” and “general”, with smaller companies trading in the general segment.
Blue Label said Cell C’s new management had put the company back on a growth path, having made significant progress in both operational and financial metrics.
“Should the proposed restructure of the group be implemented, it will facilitate a separation and potential future listing of Cell C from Blue Label’s existing distribution businesses, allowing investors to independently assess the value and strategic focus of each business,” it said.
“Cell C has taken a capital light approach to its mobile network, using its own spectrum assets in combination with physical network infrastructure owned by other mobile network operators,” Blue Label said.
“Going forward, Cell C will leverage the flexibility that comes with its capital light model, and the ability to roam across partner networks, and invest further to enhance customer offerings and experience.”
Part of the restructuring blueprint will see The Prepaid Company, a subsidiary of Blue Label, convert its debt claims against Cell C into equity, thus reducing the mobile operators high gearing.
Blue Label, which first invested in Cell C in 2017 in a R5.5bn deal, has already recapitalised the company twice since the initial investment.
SA’s three largest mobile network operators — MTN, Vodacom and Telkom — are worth a combined R552bn on the JSE.
Vodacom is the most valuable telecom company on the JSE, at R274bn, with MTN valued at R229bn and the two companies comfortably members of the top 40 listed groups family.
Telkom is worth R19.5bn on the local exchange.
Cell C 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 writedown, Blue Label said in February 2023 it had revalued the Cell C investment on its books to R962.5m, showing evidence of some positive momentum in the mobile business.
Blue Label earlier this year took a bullish tone on Cell C’s prospects with the group saying the mobile network operator had turned about its business after languishing for years under a mountain of debt and an uncompetitive structure.
Cell C has over the past two years been poaching Vodacom’s executives as the company looks for new growth opportunities. These include CEO Jorge Mendes, who in turn has appointed fellow Vodacom alumni Chris Lazarus, Darius Badenhorst, Melanie Forbes and Rachael Ayo-Oladejo.
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