The news:
- Blue Label plans to list Cell C on the JSE’s main board.
- The restructuring includes converting debt to equity and transferring assets.
- The initiative seeks to enhance Cell C’s financial sustainability and operational efficiency.
Blue Label Telecoms is considering listing its mobile subsidiary, Cell C, on the Johannesburg Stock Exchange (JSE) as part of a comprehensive financial restructuring strategy. This move aims to unlock shareholder value and streamline operations following years of financial challenges at Cell C.
In a recent announcement, Blue Label outlined a proposed restructuring that would facilitate Cell C’s separation and potential future listing on the JSE’s main board. The plan involves several key transactions designed to optimise Cell C’s capital structure and prepare it for independent operation.
One significant aspect of the restructuring is the conversion of debt into equity. The Prepaid Company (TPC), a wholly owned subsidiary of Blue Label, will transfer Cell C airtime currently held on its balance sheet to Cell C in exchange for newly issued equity. Additionally, TPC’s outstanding debt claims against Cell C will be capitalised and converted into equity, reducing Cell C’s leverage.
Another critical component is Cell C’s acquisition of Comm Equipment Company (CEC), responsible for its postpaid offerings. This acquisition will enable Cell C to assume full responsibility for its postpaid customer base, including supply chain, commercial operations, marketing, billing, credit, and collections.
The restructuring also involves realigning the ownership structures of special purpose vehicles (SPVs) currently holding equity interests in Cell C to match the redefined capital framework. These steps aim to streamline operations, improve financial sustainability, and enhance Cell C’s readiness for long-term growth and potential listing.
Blue Label’s strategic move comes after years of financial difficulties at Cell C. In 2017, Blue Label acquired a 45% stake in Cell C for R5.5 billion, but the investment faced challenges, leading to a write-down of its value in 2020. Recent efforts, including a capital-light approach to its mobile network and leveraging partnerships with other operators, have shown signs of operational and financial improvement.
The proposed listing and restructuring are subject to approvals from the boards of Blue Label and Cell C, shareholder and regulatory consents, and favourable market conditions. If successful, the initiative will allow investors to independently assess the value and strategic focus of Blue Label’s distribution businesses and Cell C’s telecom operations.
