{"id":606064,"date":"2025-08-11T07:59:09","date_gmt":"2025-08-11T05:59:09","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=606064"},"modified":"2025-08-11T08:01:01","modified_gmt":"2025-08-11T06:01:01","slug":"caution-from-well-known-fund-manager-about-cell-c","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/cellular\/606064-caution-from-well-known-fund-manager-about-cell-c.html","title":{"rendered":"Caution from well-known fund manager about Cell C"},"content":{"rendered":"\n

FNB Wealth investment research head Chantal Marx has warned that there are risks for investors hoping to gain from Blue Label Telecoms considering listing Cell C on the Johannesburg Stock Exchange.<\/p>\n\n\n\n

Blue Label\u2019s share price has grown significantly in the past two years, rallying over 600% from lows of R2.35 in September 2023 to a high of R17.03 on 31 July 2025.<\/p>\n\n\n\n

Speaking to Business Day TV, Marx cautioned that bringing Cell C to market still involved a lot of execution risk. \u201cThey’ll want that business to at least show a small profit before actually listing it,\u201d she said.<\/p>\n\n\n\n

Marx said there was a risk that investors could be stuck in Blue Label for a year or more, as there was a possibility that Cell C would not be ready to list when they would have ideally liked to.<\/p>\n\n\n\n

Blue Label recently announced that it was exploring various strategic options to unlock shareholder value, including listing Cell C separately and increasing transparency with investors.<\/p>\n\n\n\n

Exploring different capital sources could reduce or potentially eliminate Cell C\u2019s crippling debt burden, which negatively impacts its balance sheet.<\/p>\n\n\n\n

Cell C has also not been transparent about its finances in the past few years, with inconsistent reporting and a lack of comparable data.<\/p>\n\n\n\n

Being listed on the JSE will compel Cell C to be more transparent and provide investors with reliable and regular financial reports.<\/p>\n\n\n\n

Blue Label made the fateful decision to buy 45% of Cell C for R5.5 billion in August 2017. Within the next three years, Blue Label\u2019s share price plummeted by 90% to around R1.75 per share.<\/p>\n\n\n\n

All investors could focus on was Cell C, and it did not look good. Cell C was technically insolvent and was bleeding money.<\/p>\n\n\n\n

On 31 May 2019, Blue Label impaired its investment in Cell C to nil. However, this was not the end of Blue Label\u2019s Cell C headache.<\/p>\n\n\n\n

Cell C recapitalised \u2014 twice<\/h2>\n\n\n\n
\"\"
Chantal Marx, Head of Investment Research and Content at FNB Wealth and Investments<\/figcaption><\/figure>\n\n\n\n

Blue Label could not let Cell C perish and wash its hands of its poor decision, as it made up around 25% of Blue Label\u2019s total profits.<\/p>\n\n\n\n

Therefore, it was in Blue Label\u2019s interest to keep Cell C alive and make the mobile operator sustainable.<\/p>\n\n\n\n

In September 2022, Blue Label stated that Cell C had implemented a turnaround strategy to enhance operational efficiencies and reduce operational expenditure.<\/p>\n\n\n\n

It included recapitalising Cell C a second time, which included a R1.46 billion loan to Cell C, used to repay the mobile operators\u2019 lenders. The lenders received only 20% of their claimed loans.<\/p>\n\n\n\n

Blue Label also replaced Cell C\u2019s management team with former Vodacom executive Jorge Mendes, who took the reins as chief executive.<\/p>\n\n\n\n

Mendes slashed the mobile operator\u2019s organisational structure, with full-time employee numbers below 900.<\/p>\n\n\n\n

When Mendes took over, Cell C had embraced a strategy to become a capital-light business that outsourced its radio network infrastructure, the capital-intensive part of a telecommunications company, to Vodacom and MTN.<\/p>\n\n\n\n

Mendes followed through on this plan, saying this strategy will help Cell C achieve better margins than its larger competitors, which must spend billions to maintain and improve their infrastructure.<\/p>\n\n\n\n

Cell C focuses strongly on its Mobile Virtual Network Operator (MVNO) offering, which has shown solid growth through strong partnerships.<\/p>\n\n\n\n

Mendes said the MVNO business operates with a similar profit margin and, in some cases, greater than its direct-to-consumer business.<\/p>\n\n\n\n

He believes it has an edge over some of its larger competitors, which are unwilling to squeeze their margins to engage with specific market segments through MVNO partnerships.<\/p>\n\n\n\n

Some of Cell C\u2019s largest MVNO partners include FNB Connect, Capitec Connect, and the more recently launched Old Mutual Connect.<\/p>\n\n\n\n

Mendes explained that, in essence, this will result in Cell C becoming an aggregation player aggregating mobile traffic through various MVNOs.<\/p>\n\n\n\n

Cell C aims to be agnostic when it comes to network providers, offering its clients the \u201cbest of both worlds\u201d by providing connectivity on both MTN and Vodacom.<\/p>\n\n\n\n

The market loves what it is hearing about Cell C<\/h2>\n\n\n\n
\"\"
Jorge Mendes, Cell C CEO<\/figcaption><\/figure>\n\n\n\n

While Blue Label Telecoms’ share price performed well, the company\u2019s financial performance has been erratic.<\/p>\n\n\n\n

Blue Label’s revenue has been declining since 2017. It declined from approximately R27 billion in 2017 to just over R14 billion in 2024.<\/p>\n\n\n\n

Blue Label\u2019s net income has also deteriorated since 2017, falling from R1.6 billion to its current level of R640 million.<\/p>\n\n\n\n

Although the group\u2019s net income fell in absolute terms, it has maintained its net profit margin between 4% and 5%.<\/p>\n\n\n\n

From a purely financial perspective, the share price performance is difficult to justify. However, the positive changes at Cell C have excited the market.<\/p>\n\n\n\n

This includes Mendes taking over as CEO on 1 July 2023, and Cell C\u2019s strategy to become capital-light with a leaner workforce.<\/p>\n\n\n\n

Cell C\u2019s network strategy has also proven successful. MyBroadband Insights\u2019 quarterly network quality report found that Cell C overtook Vodacom<\/a> to become South Africa\u2019s second-best mobile operator.<\/p>\n\n\n\n

It maintained its position in the second quarter, but Vodacom achieved faster average download speeds nationally. Vodacom remains South Africa\u2019s best and most reliable 5G network, whereas Cell C has yet to launch 5G services.<\/p>\n\n\n\n

Although Blue Label\u2019s finances did not perform particularly well, there is confidence in Cell C\u2019s turnaround, which has bolstered the Blue Label share price.<\/p>\n\n\n\n

Grant Nader from Benguela Global Fund Managers said that Blue Label and Cell C had done a great job cleaning the operator\u2019s balance sheet.<\/p>\n\n\n\n

\u201cCell C has been loss-making almost since its inception. It’s now break-even from what I understand,\u201d Nader said.<\/p>\n\n\n\n

He said that the thinking around a potential listing of Cell C has driven the rally in Blue Label\u2019s share price and unlocked real value for shareholders.<\/p>\n\n\n\n

Blue Label share price<\/h2>\n\n\n\n
\"\"<\/figure>\n\n\n\n

Blue Label Telecoms Finances<\/h2>\n\n\n\n

The figures below are reported annually, with data points recorded every six months.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n
\"\"<\/figure>\n","protected":false},"excerpt":{"rendered":"

Blue Label\u2019s share price has grown significantly in the past two years, but portfolio managers are warning there was still significant risk in its plan to list Cell C on the JSE.<\/p>\n","protected":false},"author":15,"featured_media":555893,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_threads_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[19,14],"tags":[1017,355,67739],"class_list":["post-606064","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-cellular","tag-blue-label-telecoms","tag-cell-c","tag-chantal-marx"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/606064"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=606064"}],"version-history":[{"count":4,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/606064\/revisions"}],"predecessor-version":[{"id":606070,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/606064\/revisions\/606070"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/555893"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=606064"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=606064"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=606064"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}