How much Cell C is really worth

Cell C recently announced a new restructuring plan, which will reduce net debt to R8 billion or less when implemented. The target is to reduce the debt further over the next year.

As part of the deal, Blue Label Telecoms submitted a conditional binding offer to Cell C’s board of directors.

The deal will see Blue Label Telecoms contribute R4 billion in a subscription for approximately 35% of Cell C’s total issued share capital at the conclusion of the restructuring programme.

Management on behalf of the employees of Cell C have also submitted a binding offer to co-invest in the company with Cell C’s current shareholder 3C Telecommunications, and Blue Label.

Cell C employees will ultimately hold around 30% of the total issued share capital in Cell C at a cost of R2.5 billion.

If successful, the restructuring will result in 3C Telecommunications holding 35%, management and staff 30%, and Blue Label 35% of Cell C’s ordinary shares.

How much Cell C is worth

Cell C’s restructuring sheds light on the true enterprise value of the company.

The enterprise value is a measure of a company’s total value, which is used as a more comprehensive alternative to equity market capitalization.

Enterprise Value = market value of common stock + market value of preferred equity + market value of debt + minority interest – cash and investments

In Cell C’s case, the only relevant values are the market value of preferred equity, and the market value of debt. This leaves the equation:

Cell C’s Enterprise Value = market value of equity + market value of debt

Using Blue Label Telecoms’s offer of R4 billion for 35% of Cell C’s shares, it gives a market value of around R11.4 billion.

After the restructuring, the market value of debt will be around R8 billion, which means:

Cell C’s Enterprise Value is R11.4 billion + R8 billion = R19.4 billion

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How much Cell C is really worth