Cell C still technically insolvent
Blue Label Telecoms has reversed its impairment of Cell C and started recognising its share of the mobile operator’s profits and losses. However, Cell C remains technically insolvent.
In its financial statements for the year ended 31 May 2025, Blue Label reported that Cell C had assets worth R15 billion, while its liabilities were close to R16.1 billion.
This represents a substantial improvement in Cell C’s negative equity position since last year, when it stood close to R3.2 billion.
Blue Label also reported that Cell C showed a net profit before tax of R264 million, a substantial improvement from the previous year’s before-tax loss of R22.4 million.
It also recognised R2 billion in Cell C’s deferred tax, yielding a net profit after tax of R2.2 billion. However, this was offset against the share of Cell C’s losses that Blue Label did not recognise for five years.
Blue Label explained in previous years that it would resume recognising Cell C’s share of profits only after its share of the profits equals the share of accumulated losses not recognised. This has now happened.
Blue Label stopped recognising Cell C’s share of profits and losses in 2019 after impairing its investment in the mobile operator to nil.
The impairment came after Blue Label took significant pain following its acquisition of Cell C, including the operator reporting an R8 billion loss in the financial year ended 31 May 2019.
Blue Label acquired a 45% stake in Cell C in 2017 as part of a deal to recapitalise the company when it was buckling under the weight of huge foreign-currency loans.
The company failed to turn a profit in over 22 years of operation, accruing an enormous debt burden in a bid to compete against Vodacom and MTN.
Cell C has also suffered from a lack of strategic direction, with a regularly changing leadership team and, at times, conflicting strategies.
Recapitalisation redux
Within two years of the first recapitalisation, it was clear that the deal had failed to deliver the planned result. Blue Label soon embarked on a second recapitalisation deal to try and rescue Cell C.
The severity of the situation became even more apparent when Cell C began defaulting on its debt in 2020. It took almost three years for Blue Label and Cell C to conclude the second recapitalisation.
When the dust settled, Cell C emerged technically insolvent. Its liabilities had been reduced by over R2.7 billion, but its assets had also been slashed as part of a strategy to stop pouring money into its own cellular network.
Cell C had decommissioned its radio access network, instead relying on roaming and network sharing agreements with Vodacom and MTN.
While Cell C’s balance sheet did not inspire hope, the company appointed several new board members and a new CEO, Vodacom veteran Jorge Mendes, to try to turn its fortunes around.
Mendes is leading a turnaround plan to save Cell C and transform it into a sustainable business that can stand on its own two feet.
He has described Cell C’s balance sheet as a “crime scene” that would take years to clean up.
However, he said the balance sheet was not their central focus to turning the company around — becoming cash-flow positive was.
Blue Label’s latest results showed that Cell C had improved its negative equity position substantially.
In its 2023 financial year, it was -R4.0 billion. By 2024, it had improved to -R3.2 billion. In 2025, it stands at around -R1.1 billion.
“Our focus is not on the balance sheet yet. We focus on ensuring that operational KPIs are aligned and that we are cash-flow positive and on the front foot,” Mendes said last year.
“In a nutshell, we will continue to grow the revenue across all our lines of business. That is a 100% reliable and sustainable company. And, I think, after 12 to 18 months, it will be something reasonable.”
Mendes said they will focus on ensuring the balance sheet doesn’t weaken further, with the company managing its costs tightly and becoming asset-light.
Cell C CFO El Kope added that they had only started year three of a six-year recapitalisation programme in 2024 and that the path to solvency will not be completed overnight.
“We will continue to unwind our liabilities, and you will start seeing the acceleration of that unwinding over the next two years. Then we will start focusing on the shareholder debt.”
“What is unique for us is that all our long-term debt is shareholder debt, and we will start unwinding that well into 2028 and 2029.”
The table below summarises Cell C’s financial statements as reported in Blue Label’s latest annual results.
| Cell C financials — 31 May 2025 | ||
|---|---|---|
| Element | 31 May 2025 | 31 May 2024 |
| Assets | R15.02 billion | R14.1 billion |
| Liabilities | R16.06 billion | R17.3 billion |
| Negative equity | -R1.04 billion | -R3.18 billion |
| Revenue | R11.1 billion | R10.7 billion |
| Before-tax profit/loss | R264.4 million | -R22.4 million |
| After-tax profit | R2.19 billion | R279.5 million |
| Blue Label’s share of profits | R1.51 billion | R176.6 million |
| Reverse 2019 impairment | (R1.61 billion) | — |
| Net Blue Label share of losses | -R98.7 million | — |
| Blue Label recognised deferred tax of R2.03 billion, boosting Cell C’s after-tax profit. | ||
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