Blue Label Telecoms said it is confident that Cell C will continue as a going concern for a while, and that it will eventually be recapitalised.
This is according to Blue Label Telecoms’ unaudited interim results for the six months ended 30 November 2020.
The company posted revenue of R9.6 billion and a gross profit of R1.14 billion.
Core headline earnings for the period ended 30 November 2020 amounted to R376 million, of which R351 million related to continuing operations and R25 million to discontinued operations.
Blue Label Telecoms is a 45% shareholder in Cell C, which has been impaired to a valuation of nil.
Blue Label also said that if Cell C is able to pass a solvency and liquidity test, the primary put option obligations to the minority shareholders will be transferred to Digital Ecosystems.
“A formal agreement legislating for the above will be concluded imminently,” Blue Label said.
“If, however, Cell C is unable to pass the solvency and liquidity test in the future, the primary obligation in respect of the put options may revert back to BLT.”
Cell C as a going concern
Blue Label Telecoms highlighted a number of key factors that instilled confidence in the company that Cell C will continue as a going concern and eventually be recapitalised.
These included the two roaming agreements and the ability to continue trading despite liquidity concerns.
“Cell C concluded the national roaming agreement with MTN on 7 August 2019, which became effective on 4 May 2020,” Blue Label said.
“This agreement is one of the key pillars in Cell C’s transformation plan as well as its long-term network strategy to optimise operating costs and reduce capital outlay as part of the turnaround strategy.”
The Cell C board has also established a liquidity committee to ensure the business is not trading recklessly.
“Although the liquidity position of Cell C remains challenging, Cell C has proven that it has managed to continue trading despite the liquidity concerns and management is confident that this committee will manage the liquidity position of Cell C until the conclusion of the recapitalisation process,” Blue Label said.
Stakeholders have appointed independent advisers to assist with the recapitalisation and debt restructuring process, and formal engagements are ongoing, the company added.
Optimistic of recap
Blue Label Telecoms also pointed to the recently-announced roaming agreement with Vodacom that was concluded in November 2020 as a marker of Cell C’s progress.
“Contract and broadband customers will be transitioned in stages to roam on the Vodacom network,” Blue Label said.
“The strategic vision is to differentiate Cell C by focusing on innovative products and services without being owners of capital intensive infrastructure.”
The company added that the going concern assumption for Cell C was still applicable, and it was confident the recapitalisation could be achieved.
“Although no certainty exists around the successful implementation of the recapitalisation, management remains optimistic,” Blue Label said.