Major South African telecoms company gets big Cell C boost

Blue Label Telecoms saw a significant improvement in its 2025 financial year, as the company recognised fair value gains on its substantial investment in Cell C.

Blue Label, which owns mobile service provider Cell C and The Prepaid Company, released its results for the year ended 31 May 2025 on Wednesday, 27 August.

These results revealed a strong performance for the company, with a 262% increase in earnings per share to 276.52 cents.

In addition, the company recorded a 264% jump in net profit after tax to R2.48 billion.

Blue Label explained that the positive contributions to its earnings were all attributable to the group’s investment in Cell C.

Firstly, the company’s fair value movements amounted to R176 million, comprising fair value gains of R223 million and R149 million on the Gramercy and SPV1 derivative instruments, respectively.

However, it noted that this was partially offset by a fair value loss of R196 million on the Class B Preference Shares.

Secondly, Blue Label saw a reversal of investment impairment of R1.56 billion related to the initial impairment of R2.5 billion on Blue Label’s investment in Cell C.

This impairment was recognised on 31 May 2019. Of the total impairment, R962.5 million was reversed in November 2022, with the balance of R1.56 billion reversed in the current year, in line with an improvement in Cell C’s equity valuation.

Thirdly, Blue Label recognised its share of Cell C’s accumulated net losses of R1.61 billion for the period from 1 June 2019 to 31 May 2024. 

As at 31 May 2025, the group has fully recognised its share of all previously unrecognised historical losses associated with Cell C.

Lastly, the company pointed to positive headline earnings adjustments of R1.59 billion, attributable to the reversal of the group’s share of historical impairments recognised by Cell C of R3.14 billion.

This was partially offset by the reversal of the impairment previously recognised on Blue Label’s investment in Cell C of R1.56 billion.

Despite this significant growth in earnings, Blue Label’s revenue declined by 4% to R14.05 billion in the period.

However, the company pointed out that since only the gross profit earned on “PINless top-ups”, prepaid electricity, ticketing and universal vouchers is recognised as revenue, its effective revenue growth equated to R6.7 billion (7%).

This resulted in a total revenue of R96 billion compared to the prior year of R89.3 billion.

Blue Label also reported that its gross profit increased by 2% to R3.38 billion, corresponding to an increase in margins from 22.57% to 24.02%. 

This margin increase can be partially attributed to the growth in “PINless top-ups”, prepaid electricity, ticketing and universal vouchers, where only the gross profit earned thereon is recognised as revenue.

Blue Label’s EBITDA increased by 17% to R1.43 billion, reflecting a R288 million decline in Comm Equipment Company (CEC), offset by a R490 million increase across the remaining group entities.

The decline in CEC’s EBITDA was primarily driven by a reduction in the division’s subscriber base and lower average revenue per user (ARPU). 

Despite these strong results, Blue Label’s board elected not to declare a dividend for its 2025 financial year. 

The company’s solid performance comes as it is implementing a restructuring plan following years of consecutive losses, largely related to its investment in Cell C.

This restructuring will involve the separation of Blue Label’s telecoms and non-telecoms business units.

In May 2025, Blue Label said this restructuring could also include unbundling and separately listing Cell C.

“Overall, the restructure is intended to streamline operations, improve financial sustainability, and enhance Cell C’s strategic readiness for long-term growth and potential listing,” the company said.

More recently, Blue Label also announced plans to potentially change its name to Blu Label Unlimited Group.

While not yet finalised, the company believes this name change better reflects its new direction, identity and business focus.