Earlier this year a Business Day editorial offered a cynical account of the potential listing of Cell C following the announcement by Blu Label Unlimited (formerly Blue Label Telecoms) of a strategic review and restructure (“The Cell C illusion”, May 21).
That editorial, and its most recent iteration several weeks ago, continues to frame Cell C as a perennial underperformer, and Blu Label’s efforts as little more than “ingenious engineering” (which they in fact are). Looking at the Cell C investor presentation released by Blu Label, I believe it is worth offering a contrary view.
My view is that in the years to come business schools will use Cell C’s story as a case study in how tenacity, belief and the innovative deployment of financial instruments can turn the most beleaguered business into a contender. Where 99% of companies in similar circumstances would have closed their doors and retrenched staff, Cell C has clawed its way back from the brink. It is a survival story that defies conventional wisdom and deserves to be recognised as one of SA’s great corporate turnarounds.
Profitability is real, not a mirage
The editorial asserted that investors are “gambling on another restructuring” and implies that Cell C remains unprofitable. That is simply false. Cell C crossed back into profitability in late 2024 and now generates healthy, unencumbered earnings before interest, taxes, depreciation and amortisation (ebitda) of more than R3bn annually. This is not paper profit conjured by accounting tricks, but hard operational cash flow from a leaner, more disciplined business.
Critics dismiss the recent transactions as “sleight of hand”. That is a lazy shorthand for something far more rigorous. The debt-to-equity conversion, the R2.15bn asset-for-share exchange, and the transfer of airtime worth R7.3bn-R7.5bn, are not high-wire tricks. They are precisely the kind of structured, tightly sequenced transactions required to remove legacy debt, consolidate assets and create a transparent, investible balance sheet ahead of a potential listing. Far from merely “ingenious engineering”, this is financial discipline of the kind global markets expect.
Competitive not dependent
The editorial derided Cell C’s roaming strategy as “outsourced dependence”. In fact, it is a rational adaptation to industry economics. By roaming on Vodacom’s and MTN’s networks, Cell C accesses more than 28,000 base stations nationwide without the crushing debt burden of building them. This frees capital for innovation and customer acquisition. With its aggressive pivot into mobile virtual network operator (MVNO) partnerships — from Capitec and FNB to Shoprite and Old Mutual — Cell C has carved out a differentiated model that plays to its strengths rather than its weaknesses.
For much of the past decade Cell C was written off as a failed experiment. Heavily indebted and with a shrinking market share, it was dismissed as irrelevant. Even its largest shareholder endured scathing criticism for continuing to back what many saw as a bottomless pit. Yet instead of walking away Blu Label doubled down.
This bought Cell C time through several recapitalisations that preserved liquidity, kept thousands of jobs intact, and maintained competition in a market otherwise dominated for years by a duopoly (though this has changed with the emergence of an outstanding and well-run Telkom).
Time that allowed Jorge Mendes and his team, appointed in July 2023, to deliver a leaner, sharper business. Today, instead of being a drag, Cell C contributes to Blu Label’s earnings and has been one reason for the rerating of its share price.
The suggestion that Blu Label’s strategy is a game of passing the buck to public shareholders misunderstands the reality. What has been presented to the market is a delevered, profitable, strategically differentiated telecoms operator. Investors are not being asked to buy hope; they are being offered equity in a revitalised business with clear growth prospects. If anything, the separation of Cell C into a listed entity allows Blu Label’s own distribution and fintech businesses to be valued cleanly on their merits — a benefit Business Day itself acknowledged.
There is also a human dimension often overlooked by polemicists. By recapitalising and restructuring, Blu Label has preserved thousands of jobs, stores and customer relationships that would otherwise have been casualties of collapse. An entire supply chain has been saved. In a country desperate for growth and employment that matters enormously, and it would be remiss for this to be ignored.
The real risk? For the incumbents
Business Day urges investors to be wary of Cell C. I would suggest it is MTN and Vodacom who should be wary. For the first time in two decades Cell C is profitable, battle-ready and positioned for growth in markets such as MVNOs and digital services that its rivals cannot easily replicate.
Looking ahead, the market promise is straightforward — a clearer capital structure, an independent balance sheet, and access to capital markets that can fund growth. For Blu Label, the listing realises value from a long-encumbered asset.
If successfully listed, the Cell C episode will teach two durable lessons: patient capital allied to technical restructuring can convert distressed positions into investible opportunities; and strategic pivots that reduce capital intensity can be a defensible path to competitiveness if scale is expensive.
One day business students will pore over this case study. They will debate whether Blu Label was reckless or visionary, whether the recapitalisations were clever or desperate. But they will not dispute the outcome — against all odds Cell C survived, stabilised, and found a sustainable way forward. In the harsh world of telcos that is nothing short of a miracle.
• Silke is associate partner and heads the SA business of strategic communications and sustainability consultancy Hudson Sandler.
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