Blue Label Telecoms, the largest shareholder of Cell C, said on Thursday that it had swung into a headline loss in the year to end-May, as it writes down the value of its 45% holding in the debt-laden cellphone operator.

The company was expecting a headline loss per share of between 310.49c and 314.49c, a fall of between 369% and 372% when compared to the prior comparative period.

Cell C’s trading losses and impairments had the largest effect on headline earnings, contributing 287.65c or 71% of the fall per share, the company said.

Fair-value downward adjustments also contributed 91.75c of the fall per share, and trading losses and related impairments at its Indian operations contributed 25.46c.

Excluding these adjustments, Blue Label said it would have seen growth in headline earnings of between 24% and 29%, adding that its core businesses continued to generate profits.

Blue Label’s share price fell as much as 5.2% to R2.51 on Thursday, before paring losses to trade 0.38% to R2.51 as of 1.40pm.

The muted reaction of the share price likely reflected that there “are no sellers left”, said David Shapiro from Sasfin Securities. “Looking at the numbers, it just shows you what bad a position Cell C is in,” he said, adding that Cell C had been a bad bet to begin with.

Cell C, which has struggled to make consistent profits since it became SA’s third mobile operator in 2001, is grappling with a hefty debt burden.

In August, S&P Global Ratings downgraded Cell C’s debt to D, or “default”, its lowest-possible junk rating. This came after the cellphone operator “failed to make interest payments on certain bilateral loan facilities”.

The ratings agency said at the time, “We believe there is an increased likelihood that Cell C will be unable to repay all or substantially all of the obligations as they come due, unless it is able to restructure its debt and recapitalise its balance sheet.” 


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