End of an era for South Africa’s 24-year-old mobile giant
Cell C has officially ended its run as a private company, listing publicly on the JSE and running as an independent after almost a decade under Blu Label’s ownership.
In August 2017, Blu Label, through its subsidiary, The Prepaid Company, acquired 45% of the issued share capital of Cell C Limited for R5.5 billion.
However, the company ended up being a significant drag on the group’s finances, and by May 2019, the investment in Cell C was impaired to Rnil.
Cell C remained technically insolvent for most of its time under Blu Label.
Despite these struggles, Blu Label would later increase its stake in the company to 53%, giving it a majority share in the company, and launch a massive and complex restructuring of the group.
Under the restructuring, Cell C sold its infrastructure and moved onto MTN’s network, while also forging roaming agreements with Vodacom.
With this arrangement, MTN operates a “virtual radio access network” allowing Cell C to offer services using its own spectrum, while the deal with Vodacom is a more traditional roaming arrangement.
Without its own physical network to maintain—and pump billions of rands into—Cell C was able to focus on services and network quality, which have improved significantly over the years.
To address the financial troubles, Blu Label announced that it would list Cell C on the JSE in an IPO.
Through the listing of Cell C, Blu Label is looking to generate R6.5 billion from the sale of shares, including an overallotment of R338 million.
The proceeds from the listing will be used to settle certain interest-bearing borrowing and other debt obligations.
Blu Label initially eyed an offer price between R29.50 and R35.50 per share, which implied a market cap of between R10 billion and R12 billion for Cell C.
By Friday, 21 November, Cell C informed the market that it had to reduce this offer price to R26.50 per share, implying a market cap of R9 billion.
The stock has now officially been listed on the JSE, rising to R27.30 by 09h45, giving the telecommunications company a market value of R9.3 billion.
While the share prices has ticked higher than the offer, it has not reached initial expectations and has been seen by the market as a more muted IPO.
The company expects growth across its prepaid, postpaid, enterprise and wholesale channels, supported by its fast-expanding network of retail stores and mobile virtual network operator (MVNO) partnerships
This includes offerings from lenders such as Capitec Bank, FNB, and retailer Shoprite.
“Our JSE listing is more than a financial milestone – it confirms our belief that a leaner, more agile operating model can compete effectively while keeping connectivity affordable for all South Africans,” said Cell C CEO Jorje Mendes.
“We’ve shown that purpose and profitability can coexist and win. Cell C is redefining what a telco of the future looks like: agile, capex-light, and partnership-driven.”
“By leveraging technology and innovation, we’re building a future-ready platform that delivers real value for customers and investors alike. We are shaping the future of telco.”
Cell C is now trading as an independent following years of being part of Blu Label’s complex ownership structure. Blu Label will remain the mobile operator’s largest shareholder.
While some investors approached the IPO cautiously, citing the complexity of Cell C’s restructuring, Mendes said the market is taking a “wait-and-see” approach as the company transitions to a clean set of comparable financials over the next 18 to 24 months.
“There’s huge value in this asset,” he said. “We have a clear strategy and a business that will deliver growth. I’m excited to showcase that in the public markets.”
With reporting from Bloomberg
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