Cell C's financial woes have weighed on major shareholder Blue Label. Picture: THAPELO MOREBUDI
Cell C's financial woes have weighed on major shareholder Blue Label. Picture: THAPELO MOREBUDI

Cell C's largest shareholder, Blue Label Telecoms, expects earnings for the year to May to plunge 20%, it said on Monday.

Blue Label, which owns 45% of struggling cellphone network operator Cell C, said its audit for the financial year was “substantially complete”, but that it was in the process of determining the valuation of its investment in Cell C. The outcome will, among other things, have an effect on the carrying value of the investment, as well as the recoverability of the existing deferred tax asset within Cell C.

Blue Label’s shares have lost about a third of its value so far in 2019 on worries that Cell C is struggling to pay down debt. Cell C's debt rating was downgraded in late June by S&P Global Ratings to reflect that a default had become “a virtual certainty”.

Illustration: RUBY-GAY MARTIN
Illustration: RUBY-GAY MARTIN

In July, Cell C said it had asked law firm Bowmans to investigate business units possibly involved in “irregular” practices. 

Cell C CEO Douglas Craigie Stevenson said at the time that the investigation came amid a push by Cell C’s new management team to simplify the operator’s business model, pursue a recapitalisation deal and lift its performance.

“The goal for Cell C is to become significantly better focused on operational performance, sound business ethics and accountability throughout the business,”  he said.

gavazam@businesslive.co.za