Blue Label shareholders fully behind disposals
Unanimous vote in favour of the sale of two assets that will net telecom service provider R1bn
Shareholders of JSE-listed Blue Label Telecoms, which has lost almost half of its value since January, have unanimously approved the sale of two assets for about R1bn, in an effort to protect its core business and pay off debts.
The first sale involved the disposal of 85% of its stake in subsidiary Blue Label Mobile for R450m to DNI, a SIM card distributor that is partly owned by Net1.
Shareholders also approved the sale by its subsidiary, The Prepaid Company, of its interest in cellphones and tablets distributor 3G Mobile for R544m. This is also to be sold to DNI.
Blue Label said at the time of announcing the disposals in September that the move is to protect its core business of distributing prepaid airtime and electricity, and that it will use the proceeds to pay off debt resulting from purchases made in the past two years. It has borrowings of about R3.24bn.
Blue Label’s share price was up 1.03% to R2.94 on Wednesday afternoon, having fallen 45.66% so far in 2019. This is due largely to the underperformance of Cell C, of which the company holds 45%.
Cell C’s declining fortunes have resulted in both Blue Label and Net1 writing their combined R7.5bn investment in the operator down to nil.
Cell C, which has been subject to a recent takeover attempt by number four operator, Telkom has close to R9bn in debt according to its latest financial statements.
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”.
Cell C hopes its recently concluded extended roaming agreement with MTN, which gives it network coverage in areas where it has no network of its own, will help to reduce its capital expenditure in future as it seeks to increase revenues and pay down its debt. /With Mudiwa Gavaza
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.