File picture: Simphiwe Mbokazi/Independent Media

JOHANNESBURG - This as Blue Label yesterday completed its bid to buy a 45% stake in Cell C for R5.5bn, through its wholly-owned subsidiary, the Prepaid Company. Blue Label shareholders last week also gave the green light for its R1.9bn deal to acquire a 47.37% stake in 3G Mobile.

Now that the deal has finally received the green light, the company has taken an immense step forward in its growth strategy by transforming its business model into a vertically integrated telecoms group.

Blue Label joint chief executive Brett Levy said: “This transaction is the most significant in Blue Label’s history and marks a milestone for the group’s strategy.

"As a supplier and distributor to Cell C, we have already identified multiple synergies in the procurement chain, distribution network and provisioning of products and services.”

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The group said as a result of the recapitalisation plan, Cell C’s net borrowings would be reduced below R6bn, placing Cell C in a stronger position to compete on the consumer front.

Cell C has maintained exceptional growth and currently boasts more than 12million customers.

Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said the transaction was positive for Cell C as it gave them a stronger balance sheet to sustain their operations for at least the medium term.

“However, they will have to execute exceptionally well to gain market share in a saturated local mobile telecoms market or else the transaction will amount to kicking the can down the road.”

He said it remained to be seen if Blue Label had allocated its capital to the best opportunity.

Blue Label also needed to make sure it did not sour its important distribution relationships with Vodacom and MTN as it was now also effectively a competitor to them,” Takaendesa said.

Blue Label said its commercial contracts with all other mobile networks would remain unchanged. It has continued to look for opportunities and at the end of June it announced its intention to acquire 47.37percent of 3G Mobile, one of Africa’s largest mobile distributors, for R1.9bn.

The shareholders also gave the deal a go-ahead last week.

Mark Levy, a joint chief executive, said the acquisition of 3G Mobile aligned perfectly with Blue Label’s strategy of provisioning products and services to any channel and any customer, through a myriad of payment options.

“Our strategy takes another step forward with the acquisition of 3G Mobile. Of the R1.9bn purchase price, R900m was settled as to R250m in Blue Label shares, plus R650m in cash, while the remaining 52.63% tranche will be settled in R1bn cash,” Levy said.

- BUSINESS REPORT