Blue Label confident it can recap Cell C
JOHANNESBURG – Blue Label Telecom said on Thursday that it was confident that the recapitalisation of beleaguered Cell C would be completed by the end of the year as it reported higher annual electricity revenue following a spike in demand during the national lockdown.
The share price rose 11.83 percent to close at R3.12 on the JSE on Thursday.
Speaking during a financial results presentation yesterday for the year ended March, joint chief executive Brett Levy said that the recapitalisation was very complicated and taking longer than expected.
“We have dealt with two Chinese banks, two Chinese vendors, American bondholders, Lebanese banks, Lebanese bondholders and South African banks.
"To get everyone around the table and to get everyone to agree on the final umbrella agreement has proven to be a lot more difficult than we had envisaged and has taken a lot more time,” Levy said, adding that the company had made huge inroads in the last four months.
Blue Label, which owns 45 percent of Cell C, embarked on the recapitalisation a year ago to improve the company's capital structure and to tackle Cell C’s R9 billion debt burden.
“We really believe that we are going to recap this business this year – there is really no indication why we should not do so this year. The recap deal itself is fair for all shareholders and lenders,” said Levy.
Levy said Cell C had a new strategy and vision due to new measures introduced by the management.
Among actions taken by Cell C to transform was the signing of a national roaming agreement to reduce its costs.
Cell C also established a liquidity committee to monitor the group's liquidity position and to ensure that the business was not trading recklessly during the negotiations of the recapitalisation and debt restructure.
Cell C also embarked on a strategy to actively manage its customer base by pursuing more profitable customers, resulting in a reduction of a third in the Cell C customer base.
Blue Label, the JSE-listed specialist in prepaid products and the electronic distribution of virtual merchandise, was founded by Mark and brother Brett Levy in 2001.
Last May the group fully impaired its investment in Cell C and Cell C’s financial results did not impact its earnings for the current year.
Blue Label reported a 10 percent drop in revenue to R21.1bn for the year ended May, and gross profit declined by 2 percent from R2.17bn to R2.12bn a year earlier.
The group said it continued to deliver essential services, including electricity, airtime, data and other digital services, during the restrictions caused by the Covid-19 pandemic.
Gross electricity revenue earned was up 13 percent to R22.7bn as people stayed at home and consumed more electricity between March, April and May as a result of the national lockdown.
Joint chief executive Mark Levy said top-up of electricity demand increased and there was a change in consumer buying patterns where consumers topped up on electricity in the morning instead of in the evening.
“Blue Label has become a significant technology company and we are using technology to innovate and distribute electricity smarter, quicker and more efficiently. Covid-19 did not shock us, it highlighted a need for what Blue Label offers in the market,” he said, adding that the company had introduced several innovative products.
Levy said the group was not in survival mode, but "essentially in a growth mode".