Cell C recap deal earmarked for mid-September

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 25 Aug 2022

The long-awaited Cell C recapitalisation is finally coming to an end, with the telco’s biggest shareholder announcing the process is expected to close by mid-September.

Blue Label Telecoms, which holds a 45% stake in Cell C, says “binding long-form agreements” are expected to be completed in their entirety shortly.

The JSE-listed company presented its performance for the fiscal year 2022 today, notifying shareholders the deal had taken longer than initially anticipated, but is now expected to close in under a month.

This follows a recent bond process launched, which saw Cell C lenders accept an offer of 20c for every R1 of debt.

The lenders’ vote in favour signalled hope for fresh funding for the debt-saddled mobile operator.

Today, in a statement, Blue Label adds more detail: “In terms of the compromise offer, Cell C shall, inter alia, restructure its debt owing to certain secured lenders totalling R7.3 billion, with such amount being fixed as at November 2019, by compromising the secured lenders’ claims by an offer of 20c to the rand.”

Turning to group results, Blue Label says gross profit increased by R548 million (23%) to R2.93 billion, congruent with an increase in margins from 12.66% to 16.46%.

In the period, growth in revenue equated to 9% from R65.8 billion to R72.1 billion, and the company says it will continue to increase market share and bolster its product and services mix to defend and grow its positions in the market.

EBITDA, which demonstrates the company's worth, increased by R107 million (8%), from R1.36 billion to R1.47 billion.

In addition, Blue Label’s total assets increased by R1.9 billion to R13.3 billion, of which non-current assets accounted for R0.7 billion and current assets for R1.2 billion, says the company.

Graft update

Further, Blue Label updated shareholders on the R315 million fraud perpetrated by former senior executives.

The company revealed the graft for the first time eight months ago when it presented its half-year financial results.

The monies lost were reportedly in subsidiary Ventury Group, a company that controls Blue Label’s entities in the prepaid market space.

Blue Label settled and signed agreements with the perpetrators in late October 2021.

Today, Blue Label notified shareholders that subsequent to the year-end, R20.8 million of the balance remaining to be collected at 31 May was collected.

The company says it also had to settle professional fees incurred during the recovery of the monies, amounting to R67.9 million to the end of May.

“As the fraudulent activities had a direct impact on the group’s operating cash flows, the realisation of the recoupment income is recognised in cash flows from operating activities in the cash flow statement,” says Blue Label.

“Subsequent to the fraud investigation and detailed review of the control environment and business processes within the subsidiary, management has implemented the necessary improvements relating to the existing control environment.”