Blue Label may take control of Cell C

Blue Label Telecoms is considering taking a controlling stake in Cell C as it seeks to have more say in a company in which it is already the largest shareholder.

Blue Label could convert debt held in a special purpose vehicle to equity after it participated in a recent recapitalization of Cell C, its founder and co-CEO Brett Levy said in an interview. The business is valued at R3 billion.

“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.”

Blue Label acquired a 45% stake in Cell C for R5.5 billion in 2017 during a restructuring process that also created three special-purpose vehicles to store the distressed company’s debt.

It further boosted its interest after a recapitalization at the end of 2022 that reduced Cell C’s debt from about R10 billion to R4 billion, Levy said.

He said that boosting its stake to over 50% would allow Blue Label to consolidate Cell C onto its books and avoid double counting its debt.

Other shareholders in the company include Nedbank, Gramercy Capital Management, and Lesaka Technologies.

Blue Label says it sells about 60% of South Africa’s prepaid airtime, allowing mobile users to purchase minutes ahead of time. It is a popular alternative to more costly monthly contracts in many developing markets.

Cell C is also a major prepaid provider but has struggled to grow in a market dominated by the larger operators MTN and Vodacom.