Blue Label has finally achieved its almost decade-long goal of securing a majority stake in Cell C, South Africa’s fourth biggest mobile operator, reaching 53.57% ownership.
Final approval from the Competition Tribunal concludes several regulatory hurdles for Blue Label – which is rebranding as Blu Label Unlimited to sharpen focus on its operations beyond telecoms – to gain controlling interest.
The company first proposed a R5.5 billion investment for a 45% stake to shareholders in 2016.
Through its subsidiary, The Prepaid Company, Blue Label gradually increased its shareholding. Until yesterday, it held 49.5% of Cell C.
With final regulatory approval to acquire an additional 4.04% stake from Cedar Cellular Investments, Blue Label now has control over the mobile operator.
“This development represents a milestone in advancing the company's strategic objectives and operational capabilities within the telecommunications sector,” Blue Label said in a statement to shareholders.
Just last week, Blue Label announced plans to exit Cell C via a separate JSE listing. The complex restructuring could leave both companies debt-free.
The pre-listing restructuring involves “various transactions aimed at optimising Cell C's capital structure and balance sheet in preparation for a separation and listing of the Cell C ListCo business on the JSE,” Blue Label said.
Joint-CEO Mark Levy has explained that listing the mobile network operator would allow Cell C to repay its debts to Blue Label.
Approval from the Competition Tribunal to acquire the 4.04% stake from Cedar Cellular Investments was the final regulatory hurdle.
Cedar Cellular was primarily involved in Cell C’s 2017 recapitalisation, during which Blue Label also invested the R5.5 billion for 45% of the operator, reducing its debt to R8 billion.
At the time, Blue Label said: “The proposed transaction provides a compelling value proposition to Blue Label, as well as to Cell C and its customers, affording both companies the opportunity to realise synergies in product distribution, and positioning Blue Label to benefit from the improved operational and financial performance that the combined platform will create.”
Blue Label has intervened multiple times to rescue debt-laden Cell C. In 2020, when the operator defaulted on loans of around R7.3 billion, the company injected more than R1 billion, restructuring much of the remaining debt.
Levy admitted to ITWeb that Blue Label made execution missteps during the process. “You know that old adage: it's not good horses or bad horses, it's bad jockeys. And I think we failed on the jockey side,” he said.
Blue Label’s investment was made for “all the right reasons,” said Levy, describing Cell C as a “phenomenal asset” with key spectrum.
Cell C has reported a return to net profit and broad-based growth, posting a profit before tax of R280 million for the year to May – a swing of over 200% from the prior year’s R9 million.
Since Blue Label’s initial cash injection, its bid for a full majority has navigated several regulatory hurdles, including the technical transfer of Cell C’s spectrum, having been approved by the Independent Communications Authority of South Africa.
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