Significant progress seen on Cell C recap: Blue Label

Blue Label Telecoms co-CEO Brett Levy

Cell C’s largest shareholder, Blue Label Telecoms, is confident a recapitalisation of the mobile operator will be completed in the coming months and that this will put it on a new growth trajectory.

That’s according to Blue Label co-CEO Brett Levy, who told journalists on Thursday that concluding the recap has proved to be “very complicated” given the number of parties involved, including shareholders and lenders. This has included negotiating with Chinese, Lebanese, US and South African banks and bondholders.

“To get everyone around the table to agree on the final umbrella agreement has proven to be a lot more difficult than envisaged,” Levy said. “The good news is we have made huge inroads in the last three or four months.”

What remains to be agreed is a term sheet, and solid progress is being made on this front, according to both Levy and Cell C CEO Douglas Craigie Stevenson, who spoke to TechCentral on Wednesday.

Levy said there is “no reason” the recap won’t be concluded by the end of the year. He added that the recap will be fair to lenders and other stakeholders, including Cell C itself. “All the stakeholders over the last two months have really been co-operative. They have been playing ball to get this over the line.”

‘Really good job’

Cell C’s management team, under Craigie Stevenson and chief financial officer Zaf Mahomed, has been “really good”, Levy said. “Cell C as a company has a new strategy, a new vision and they’re implementing it. The management and board of Cell C have done a really good job.”

He added that he is confident that, after several previous recapitalisations of Cell C led by shareholders, that this will be the last one and that the company’s future will be rosier than its past. However, Blue Label continues to attach a nil carrying value to its 45% stake in Cell C, for which it paid R5.5-billion in 2017. If Cell C can be put back on a solid financial position, this means there’s room for plenty of upside for Blue Label, even with a diluted shareholding flowing from the recap.

Craigie Stevenson said the recap is expected to bring in about R4-billion, but admitted the process “has been dragging”, which has led to an “element of fatigue”. However, the term sheets are “almost there”, he said.

Cell C CEO Douglas Craigie Stevenson

So far, Cell C’s bondholders and other lenders have agreed not to call in their debts, holding out instead for a successful resolution of the recap process.

Craigie-Stevenson and his team have led a major overhaul of Cell C’s strategic focus in the past year, with a decision to outsource management of its radio access network to MTN – a process that could take up to three years but which will dramatically reduce capital expenditure – and to cut jobs.

A section 189 process is currently under way, with a clearer picture of how many employees will be let go likely to emerge in the next two weeks. Up to 960 jobs may go, excluding over 540 who may be facing the axe as Cell C reduces the number of its retail stores.  — © 2020 NewsCentral Media