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Blue Label up on refinancing deal

• Telecoms company will hold 49.53% of struggling mobile provider

Mudiwa Gavaza gavazam@businesslive.co.za

Shares in Blue Label Telecoms shot up as much as 5% on Thursday after the mobile commerce group said it has finalised the long-awaited recapitalisation of Cell C. The shares later pared gains to 2.88% higher, but are up more than 26% so far this year.

Shares in Blue Label Telecoms shot up as much as 5% on Thursday after the mobile commerce group said it had finalised the long-awaited recapitalisation of Cell C.

The group’s share price surged more than 5% in morning trade, but later pared gains to end the day 2.88% firmer at R6.43. It is up more than 26% so far this year.

Mobile operator Cell C has struggled to make a profit since it opened for business in 2001 and is laden with long-term debt of R8.7bn, and led Blue Label and Lesaka Technology (formerly known as Net1), which owns 15%, to write down their combined R7.5bn investment to nil.

Part of the deal involves Blue Label lending Cell C R1.03bn, which will be used to pay 20% of claims by secured lenders. Lenders looking to stay invested will lend a further amount to Cell C in exchange for new shares.

The deal will also see Blue Label increasing its shareholding to 49.53%.

To improve Cell C’s liquidity, Blue Label will also buy R2.4bn worth of prepaid airtime from the mobile provider while deferring a R1.1bn loan repayment to owed to it.

AIRTIME PURCHASE

Part of the funding for the airtime purchase will come from lenders, which have already approved lines of credit to Blue Label.

Blue Label says the new operating structure, “together with the recapitalisation of the current debt structure, will result in a significant improvement of its liquidity and ensure the long-term sustainability of Cell C”.

The recapitalisation is the “final and critical pillar of Cell C’s turnaround strategy; deleveraging the balance sheet, providing liquidity to operate, and putting the company on a trajectory of growth and long-term sustainability,” Cell C CEO Douglas Craigie Stevenson said.

“Day 1 post recap, Cell C will have achieved a significant reduction in the debt of the business to enable us to move forward and make the business more streamlined as a new, reinvigorated and fit-for-purpose entity to compete in the dynamic and changing telco landscape.”

MOBILE OPERATOR CELL C HAS STRUGGLED TO MAKE A PROFIT SINCE 2001

Because part of the yearslong deal is a turnaround strategy, Cell C has been shifting away from owning and operating its own network infrastructure in favour of roaming agreements with MTN and Vodacom.

The company uses its own spectrum through network towers operated by the larger peers players and is participating in the ongoing spectrum auction.

Earlier, Blue Label — valued at R5.87bn — completed a bond process as part of a “compromise offer” that saw lenders receive 20c for every R1 of debt. The notes, worth $184m, are a portion of Cell C’s R7.3bn debt owed to secured lenders.

The term sheet, first announced in March, sets out the general principles of the agreement between Blue Label, Cell C, funders and other shareholders and is subject to the conclusion of all legal documentation and the fulfilment of all the conditions.

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2022-09-23T07:00:00.0000000Z

2022-09-23T07:00:00.0000000Z

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