Blue Label gains control of Cell C licences

Blue Label Telecoms has taken a significant step in advancing its strategy to obtain control over Cell C.

The company announced on Friday, 24 January, that the Independent Communications Authority of South Africa (ICASA) has approved the transfer of control over Cell C’s telecommunications licenses. 

This was necessary because control of the licenses is considered transferred when a single shareholder – in this case, Blue Label’s The Prepaid Company – owns more than 50% of Cell C’s issued share capital.

The Prepaid Company is a wholly owned subsidiary of Blue Label Telecoms. 

Blue Label explained that while the control of the licences changes, they will remain registered under Cell C.

Blue Label said this approval represents a significant milestone for the company and a crucial step in advancing its strategy to obtain control over Cell C.

Blue Label’s interest in Cell C started in August 2017, when the company signed its biggest deal ever by acquiring 45% of Cell C for R5.5 billion.

This acquisition was done during a restructuring process that also created three special-purpose vehicles to store the distressed company’s debt.

At the time, Blue Label co-CEO Brett Levy said they were positive about a turnaround in Cell C’s financial and operational performance.

However, Cell C has remained a drag on the company’s results since, and while there are some signs of recovery, the mobile operator is still technically insolvent.

In January 2024, Cell C unveiled its new turnaround plan, aiming to reclaim its position as the country’s third-largest telecommunications company.

“We are not in the clear yet. We have been recapitalised twice now. Our balance sheet still looks like a crime scene,” Cell C CEO Jorge Mendes said.

The latest recapitalisation included a R1.46 billion loan from Blue Label to Cell C, which was used to repay Cell C lenders. The lenders received only 20% of their claimed loans.

Regardless of Cell C’s troubled financials, Blue Label has remained steadfast in its commitment to taking control of the mobile operator.

In 2023, Blue Label said it is considering taking a controlling stake in Cell C as it seeks to have more say in the company.

“We will be looking at the possibility of taking control of Cell C,” Levy said. “Right now, we are in no man’s land, where we have a big percentage of the company and hold the majority of the debt with no control.”

In November last year, The Prepaid Company acquired another significant stake in Cell C when it entered into a deal to buy millions of Cell C’s debt and some of the company’s shares from Gramercy.

At the time, Blue Label announced that Cell C owes Gramercy R414.77 million, plus interest.

Cell C would have had to pay this debt back by the end of March 2026. However, Cell C had yet to make any payments on the debt.

Therefore, on 11 November, The Prepaid Company and Gramercy concluded a deal whereby TPC would buy this debt for R450 million.

TPC will pay Gramercy back in four non-interest-bearing instalments of R112.5 million in cash. Blue Label said this would be funded from the company’s cash resources or existing facilities.

In a separate transaction, TPC bought 6.09% (88,939,299 shares) of Cell C’s issued share capital from Gramercy.

TPC acquired these shares for R6 million, which valued Cell C at R98.5 million.