Blue Label falls to low on Cell C results
Cell C’s interim results show that net debt excluding leases has fallen nearly R11bn to R7.3bn at the end of June
Shares in Blue Label Telecoms closed at their lowest level in more than five years on Tuesday after Cell C interim results disappointed investors.
Blue Label, which bought 45% of the mobile operator in a recapitalisation deal a year ago, closed 8% down at R7.70 — the lowest since June 2013 — as Cell C said total revenues grew just 5% in the six months to June and debts climbed.
Its service revenues grew a healthier 11% to R6.9bn, though total revenues were dented by a sharp fall in handset sales as the lower end of the postpaid business slowed and as some data subscribers were lured away by competitors’ promotions.
Meanwhile, net debt grew to R7.3bn, from about R6bn at the time of Cell C’s recapitalisation, as the firm started building its network again. But those investments helped it trim its interim loss by a third, to R645m.
Cell C has struggled to break even since its 2001 launch — its only annual profit came in 2017 — but CEO Jose Dos Santos suggested the operator is closing in on profitability again. “I don’t want to give too many forward-looking statements — I do have listed shareholders — but what I can say is we’re on a trajectory to actually achieve free cash flow and operating profit in the months or year to come.”
The company’s decision to open its network to mobile virtual network operators such as FNB Connect, Virgin Mobile and MRP Mobile, is “starting to pay dividends”. Wholesale revenues from that unit jumped 51% to R486m, or 7% of service revenues. “We’re talking to other industry players, so potentially in the next month or two we’ll have exciting announcements in that space,” Dos Santos said.
Cell C is also “aggressively” growing its fibre-to-the-home business, which was boosted by two acquisitions in 2017.
It is looking for more deals, Dos Santos said, adding Cell C aims to be “a one-stop solution to the end-user in terms of data, voice and content”.
He said while Cell C’s debts will climb through the rest of the year as it invests in its network, gearing levels are “quite manageable”. “The board and shareholders are looking at the best option for future funding, whether it will come from debt or through equity.”
Cell C wants to go public in late 2019 or early 2020, partly to fund new ventures such as its content platform, Black.