In its recent annual result, South Africa’s Blue Label Telecoms reported that Cell C made a loss of US$146 million between 1 June 2021 and 31 May 2022.
According to media reports, Blue Label’s wholly-owned subsidiary, The Prepaid Company, acquired a 45 per cent stake in Cell C on 2 August 2017 for US$328 million.
The acquisition formed part of a recapitalisation deal to rescue the company from its crippling debt.
Blue Label co-CEOs Mark and Brett Levy were optimistic about Cell C’s potential and expected a turnaround in its financial and operational performance; however, the operator’s problems continued.
On 31 May, Blue Label impaired its investment in Cell C to nil and no longer recognised the loss it makes in its overall financial results.
Blue Label states in its report, “As the Group’s share of Cell C’s losses exceeds the carrying amount of the investment (Rnil), the Group has ceased recognising its share of further losses.”
“If Cell C subsequently generates profits, the Group will resume recognising its share of profits only after its share of the profits equals the share of losses not recognised,” the operator added.
In 2019, Cell C embarked on a network transformation strategy with the initial plan to outsource the running of its network to MTN. However, it later emerged that Cell C had started migrating its contract subscribers onto Vodacom’s network, not MTN’s as announced initially.
Blue Label disclosed on 4 August 2020 that Cell C had defaulted on a US$184 million repayment of First Priority Senior Secured Note.
Blue Label announced its new recapitalisation plan for Cell C on 15 March 2022 to restructure its debt of roughly US$435 million.
Furthermore, Blue Label informed shareholders that Cell C will present its annual results for 31 December 2021 and interim results for the six months ended 30 June 2022 on 14 September 2022.