Cell C faces a critical meeting with former bond holders on Monday who will vote about accepting 20 cents in the rand over R7.3 billion of debt, and which will include a recapitalisation of the debt-stricken mobile phone group.
Cell C’s liabilities far exceed its assets and it has defaulted on its debt with bondholders, with its credit rating cut to D (default) by S&P Global Ratings.
The group, which has more than 16 million subscribers, has however devised a recapitalisation and operational turnaround strategy to avert bankruptcy, and an operating profit was reported for the last interim period versus a substantial loss the year before.
Cell C also participated in the government’s recent spectrum auction, and is the only mobile operator to have not fully paid for the spectrum it won.
“The restructuring and refinancing of Cell C has been long and complicated. We are pleased to be closer to concluding a transaction that will deleverage the balance sheet and provide the required working capital to operate and grow the business,” Douglas Craigie Stevenson, the CEO of Cell C said in response to BR questions.
Cell C was first recapitalised with R5.5bn by Blue Label Telecoms, which owns 45 percent of Cell C, in 2017.
The Prepaid Company (TPC), a subsidiary of Blue Label, will loan the mobile operator up to R1.46bn in the latest recapitalisation.
Cell C will use this loan to settle secured lenders’ claims by paying an amount of 20c to the rand. At least 75 percent of votes controlled by debtors with first-priority secured notes must approve the deal at Monday’s meeting, to be binding on all noteholders.
Stevenson said a market update would be provided in due course.
“We have a clear business strategy and have right sized and streamlined the business to ensure operational efficiency. Our network model will reduce network expenses and capital expenditure, allowing us to access best-in-class infrastructure,” he said.
Cell C’s other shareholders are Net1 UEP Technologies with a 15 percent stake and 3C Telecommunication with a 30 percent shareholding. 3C is in turn 29.4 percent owned by the Employee Believe Trust, 45.6 percent by Oger Telecoms and 25 percent by broad-based black empowerment grouping CellSAf. Cell C management and staff hold 10 percent of Cell C.
In the six months to June 30, 2021, the unlisted Cell C reported massively improved results. There was a 114 percent increase in earnings before interest and tax to R736m from a R5.3bn loss the year before, while net income increased 102 percent to R148m when compared with the R7.6bn loss reported at the same time in 2021. Operating expenses had fallen by 25 percent.