Blue Label Telecoms, which owns almost half of Cell C, is considering making an offer to take control of the mobile operator in the coming months, according to co-CEO Brett Levy. Speaking to TechCentral, Levy said that Blue Label wants its and Cell C’s reporting periods aligned by May 2024 and that the firm will make a decision by its financial year-end, or 31 May, about taking control of the company. He cautioned that the process could be delayed by regulatory issues.
“We have a big percentage [in Cell C] but we don’t have control, which is not an ideal position to be in. You either have to sell down or buy up, but you can’t stay in the same position”, Levy said.
He added that the decision will be made in the coming months, and that regulators could approve such a deal without encountering significant obstacles.
“There’s nothing that stands out from a Competition Commission point of view; and there’s definitely nothing that stands out from an Icasa point of view. Everyone knows what we’ve [done] over the last seven years to save this business, and the value we could add to it if we had control of it. From a change of control [perspective] at Icasa, I think everyone would welcome it if we went this route, so everyone has stability,” he explained.
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Blue Label Telecoms recently revalued its Cell C stake at R3.1bn ($210m), following a write-down to nil. The carrying value for the Cell C stake on Blue Label’s books is now approximately R900m, after a 35% discount was applied. Levy said that the company will likely revalue Cell C again in the first half of its 2024 financial year.
Levy described Blue Label’s core performance as “solid” during the latest six-month reporting period. Revenue increased to R9.8bn from R9.1bn in the prior year, while the gross profit margin expanded from 14.93% to 15.67%. However, core headline earnings per share slumped to just 3.94c from 62.69c previously. Blue Label said that with the extraneous contributions related mainly to the Cell C recap and one-offs in the previous six-month period stripped out, core Heps would have climbed by 13%.
