Cell C makes R2.4 billion loss

Cell C made a loss of R2,448,510,000 between 1 June 2021 and 31 May 2022, Blue Label Telecoms has reported in its annual results.

Blue Label’s wholly-owned subsidiary, The Prepaid Company, acquired a 45% stake in Cell C on 2 August 2017 for R5.5 billion.

The acquisition formed part of a recapitalisation deal to rescue the company from its crippling debt.

Although Blue Label co-CEOs Brett and Mark Levy were optimistic about Cell C’s potential and expected a turnaround in its financial and operational performance, its problems continued.

Blue Label impaired its investment in Cell C to nil on 31 May 2019 and no longer recognises the loss it makes in its overall financial results.

“As the Group’s share of Cell C’s losses exceed the carrying amount of the investment (Rnil), the Group has ceased recognising its share of further losses,” Blue Label states in its report.

“If Cell C subsequently generates profits, the Group will resume recognising its share of profits only after its share of the profits equals the share of losses not recognised.”

Although Cell C initially reported net profits for Blue Label’s bottom line, it could not stem its trading losses.

In its annual reports since acquiring Cell C in 2017, Blue Label reporting the following net profits and losses for Cell C:

  • 2018 — R1.14-billion net profit (10 months)
  • 2019 — R8.03-billion net loss
  • 2020 — No figures for 31 May 2020
  • 2021 — R2.453-billion net loss
  • 2022 — R2.448-billion net loss

After reporting an after-tax loss of R8.03 billion in 2019, Blue Label announced it was negotiating another recapitalisation deal for Cell C.

Cell C also embarked on a network transformation strategy with the initial plan to outsource the running of its network to MTN.

It later surprised the market when it emerged that Cell C had started migrating its contract subscribers onto Vodacom’s network, not MTN’s as originally announced.

The company explained that it had struck two different deals. Its contract subscribers would roam on Vodacom, while MTN will operate a separate radio network for Cell C’s prepaid subscribers.

Blue Label announced on 4 August 2020 that Cell C had defaulted on a $184,002,000 (R3.1 billion) repayment of First Priority Senior Secured Note.

It also defaulted on interest and capital repayments related to bilateral loan facilities with Nedbank, China Development Bank, Development Bank of Southern Africa, and Industrial and Commercial Bank of China. These debts were due in January and July 2020.

“Currently, none of the bilateral loan facilities have been accelerated,” Blue Label stated.

“Noteholders are aware and support that Cell C is committed to resolving the situation by agreeing to restructuring terms with its lenders while it also continues to work proactively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness.”

Blue Label announced its new recapitalisation plan for Cell C on 15 March 2022 to restructure its debt of roughly R7.3 billion.

The priority noteholders had to vote whether to accept the deal, with 75% of votes controlled by creditors required to make it binding on all shareholders.

Initially, the noteholders were scheduled to meet on 20 June to vote on whether to take an 80% haircut on their debt.

The meeting was postponed to 5 July due to a lack of quorum, but ultimately the vote passed.

Initially, Blue Label said the transaction would be finalised in late July.

However, at the beginning of August, it said the deal’s closure had been delayed until the end of the month.

Yesterday, Blue Label announced that the finalisation of the deal had been pushed back again — this time to mid-September.

Blue Label informed shareholders today that Cell C will present its annual results for the year ended 31 December 2021 and interim results for the six months ended 30 June 2022 on 14 September 2022.

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