Uncertainty about Blue Label’s finances around Cell C

Making heads or tails of Cell C’s finances is so challenging that even the mobile operator itself was surprised when Blue Label published its latest results.

When MyBroadband reported Cell C’s latest figures from Blue Label’s annual financial statements, we received a call from a Cell C media liaison, who said the profit numbers were wrong.

Blue Label’s latest financial statements indicate that Cell C had recorded a 10.9% revenue decline for the year ended 31 May 2023.

Despite the revenue decline, Cell C reportedly swung from a R2.45 billion loss to a R4.63 billion profit. Therefore, Cell C had posted a R7.08 billion higher profit than the previous financial year.

Cell C told MyBroadband these figures were wrong, implying that Cell C was not nearly as profitable, or not profitable at all.

The mobile operator’s representative asked us where we obtained these amounts in the financial statements.

After explaining how we got the numbers, they demanded we take down our article while they investigated the figures.

We declined to remove our article but committed to effect any corrections provided Blue Label could demonstrate where we had made a mistake.

Since then, the company has gone silent.

MyBroadband followed up two hours after our conversation with the media liaison on Wednesday. However, as of Friday morning, we had received no feedback.

The section of Blue Label’s financial statements containing the seemingly problematic figures is shown in the screenshot below. It can also be seen on page 56 of the linked document.

When Daily Investor asked about Cell C’s sudden surge in after-tax profit, the media liaison provided the following response:

“This is mainly due to the recapitalisation entry below the EBITDA line and the audit sums and balance sheet clean-up.”

However, when it asked for further details about the numbers, Cell C did not provide any feedback.

Blue Label’s financial statement for Cell C with the revenue and after-tax profit line items highlighted

New special purpose vehicle

In its latest financial results, Blue Label Telecoms reported that it created a new special-purpose vehicle, SPV5, linked to Cell C debt.

Daily Investor made a valiant effort to unpick and explain the new special-purpose vehicle despite Blue Label not answering questions about it.

During the 2023 financial year, Cell C’s debt to DFA was transferred into a new SPV in exchange for a 10% shareholding in Cell C.

The special-purpose vehicle, SPV5, is required to repay the debt of R275 million in tranches from 31 December 2024 to 31 December 2026.

Blue Label Telecoms, which has a 63.19% effective economic interest in Cell C, issued a guarantee in favour of DFA to repay its debt by SPV5.

At the same time, Blue Label-owned TPC agreed to provide SPV5 with the necessary funding to make the payments of R275 million to DFA. In return, it received a claim of R699 million in SPV5.

TPC’s loan will be repayable on demand at an amount equal to:

  • The capital advance of R275 million, plus
  • R424 million, plus
  • 50% of the fair value of the Cell C shares held by SPV5 in excess of the R699 million.

The Cell C shares held by SPV5 are pledged as security in favour of TPC. However, SPV5 can sell the Cell C shares before TPC gives it any funds, provided the net proceeds exceed R375 million.

If SPV5 disposes of its shares in Cell C, R275 million of the net proceeds must be used to settle the lessor, and R100 million is to be paid to TPC as an irrevocable and unconditional break fee.

Once TPC has advanced funds to SPV5, SPV5 is precluded from selling the Cell C shares without TPC’s consent. However, TPC has no voting rights attached to the shares.

In the event of default, TPC could acquire the 10% shareholding in Cell C in the settlement of its loan.

This will only be with the prior approval of the Competition Commission of South Africa and ICASA, as such acquisition would result in TPC acquiring control of Cell C.

SPV5 is the latest special-purpose vehicle linked to a complicated web of special-purpose vehicles created by Blue Label related to its Cell C shareholding.

SPV1 and SPV4, for example, are entitled to obtain an additional 13.55% of shares in Cell C at any time from the SPVs in settlement of the loans.

It gets more complicated. TPC advanced R223 million to SPV4, which it used to buy 5.47% of the shares in Cell C from Magnolia Cellular Investments 2, which is in liquidation.

SPV3 has not been mentioned in Blue Label’s recent financial statements, and finding any information, and even whether it exists, is difficult.


On Monday, 04 September 2023, Blue Label co-CEO Mark Levy contacted MyBroadband to provide clarification on Cell C’s profit.

He explained that Cell C has recently undergone a recapitalisation to deleverage its balance sheet and provide it with the needed liquidity to operate.

Cell C’s net profit after taxation of R4.63 billion, which was included in Blue Label’s financial statements, includes extraneous income of R6.9 billion.

This is primarily related to the release of the debt in line with Cell C’s compromise to some of its lenders through the recapitalisation.

These changes were behind Cell C’s swing from a R2.45 billion loss into the profit that is currently reflected.

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Uncertainty about Blue Label’s finances around Cell C