Blue Label Telecoms, the majority shareholder of Cell C, is mulling the possible listing of the mobile operator on the Johannesburg Stock Exchange (JSE) as it restructures its business.
Today, Blue Label issued a cautionary statement, announcing it is considering various strategic options and initiatives to unlock and deliver value to its shareholders.
In the consideration of these strategic options in relation to its subsidiaries and associates, Blue Label says it is exploring a potential restructure of the group.
It explains that this proposed restructure will assist in facilitating a separation and potential future listing of Cell C on the prime segment of the main board of the JSE.
Blue Label has a non-controlling 49.5% stake in Cell C, and is looking to get an additional 4.04% stake via The Prepaid Company (TPC) in order to get control of South Africa’s fourth-biggest mobile operator.
The firm says the proposed restructure is expected to encompass various ancillary transactions, aimed at optimising Cell C’s capital structure and balance sheet in preparation for a potential separation and future listing on the JSE.
“Should Blue Label elect to implement the proposed restructure, it is envisaged that the various restructuring steps will be inter-conditional and contingent upon the potential listing of Cell C,” it says.
“The implementation of the restructure and potential listing will remain subject to, among other conditions, approval by the boards of Blue Label and Cell C, requisite shareholder and regulatory consents, and favourable market conditions.”
Further details of the proposed restructure will be communicated once this workstream has been sufficiently progressed, it adds.
Independent assessments
According to Blue Label, the proposed restructure of the group is expected to deliver significant benefits for the company and its shareholders.
“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.”
Describing the key components of the proposed restructure, Blue Label reveals that TPC, a wholly-owned subsidiary of Blue Label which holds shares and debt claims in Cell C, will transfer Cell C airtime currently held by TPC on its balance sheet to Cell C in exchange for newly issued additional equity in Cell C.
It adds that TPC’s outstanding debt claims against Cell C will be capitalised and converted into equity, further reducing Cell C’s leverage.
Cell C will acquire 100% of Comm Equipment Company (CEC), a wholly-owned subsidiary of Blue Label, from TPC in exchange for additional Cell C shares.
CEC is a subsidiary responsible for Cell C's postpaid offerings. Blue Label explains that the internalisation will enable Cell C to assume full responsibility over its postpaid customer base, including oversight of supply chain, commercial operations, marketing, billing, credit and collections.
It notes that the special purpose vehicles currently holding equity interests in Cell C will also be restructured as part of the broader initiative, aligning their ownership structures with the redefined capital framework.
“Overall, the restructure is intended to streamline operations, improve financial sustainability and enhance Cell C’s strategic readiness for long-term growth and potential listing.”
Blue Label tells shareholders that Cell C is a telecommunications and technology company within the South African market with a highly recognisable brand and strong market presence. It has a diversified business model across its retail and wholesale businesses and is the leading enabler of mobile virtual network operators in South Africa.
It points out that Cell C has taken a capital-light approach to its mobile network, utilising its own spectrum assets in combination with physical network infrastructure owned by other mobile network operators.
Going forward, it adds, Cell C will leverage the flexibility that comes with its capital-light model and the ability to roam across partner networks and will invest further to enhance customer offerings and experience.
Over the past 24 months, the strengthened Cell C executive management team has been able to successfully return the business to a strong growth trajectory with significant improvement in operational and financial metrics, driving the sustainable growth and profitability of Cell C going forward, it notes.
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