{"id":832859,"date":"2025-07-25T15:00:00","date_gmt":"2025-07-25T13:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=832859"},"modified":"2025-08-28T11:59:15","modified_gmt":"2025-08-28T09:59:15","slug":"cell-c-restructuring-set-to-be-a-big-win","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business-opinion\/832859\/cell-c-restructuring-set-to-be-a-big-win\/","title":{"rendered":"Capitec could be a game changer for Cell C"},"content":{"rendered":"\n

Flagship Asset Management Global Portfolio Manager Philip Short believes Cell C and Blue Label Telecoms will benefit from the major restructuring planned for the business\u2014and that Capitec could be a big game changer for the group.<\/p>\n\n\n\n

Blue Label Telecoms has been the best-performing stock since September 2023, with gains of over 400%. <\/p>\n\n\n\n

Short said the company could potentially double it value as it prepares to restructure Cell C over the next six months. <\/p>\n\n\n\n

The restructuring includes a debt-for-equity swap and a planned IPO. Short believes this could unlock R27 billion in value, up from its current R13 billion market capitalisation.<\/p>\n\n\n\n

Blue Label predominantly distributes digital tokens, such as prepaid airtime and electricity. It acquired a large stake in the embattled Cell C in 2017, which caused its share price to nosedive. <\/p>\n\n\n\n

\u201cDespite significant challenges, including poor capital allocations, high debt, and complex accounting structures, it was trading at compelling valuations for those willing to look past the complications,\u201d said Short. <\/p>\n\n\n\n

\u201cThe upcoming restructuring presents significant value-unlocking potential.\u201d <\/p>\n\n\n\n

In May, Blue Label said it plans a debt-for-equity swap to eliminate Cell C’s debt and increase its stake to nearly 90%. This would be followed by a Cell C IPO later in the year. <\/p>\n\n\n\n

\u201cThrough smart corporate finance activity, BLT now owns approximately 90% of the debt on Cell C’s balance sheet and 80% of the equity,” said Short.<\/p>\n\n\n\n

“Essentially, BLT owes the money to itself, setting up the debt-for-equity conversion.”<\/p>\n\n\n\n

Short said that a major area that Cell C could benefit from is its partnership with Capitec to create Capitec Connect. <\/p>\n\n\n\n

Capitec was processing 30% of all prepaid airtime in South Africa via Cell C’s channels by 2022, with Blue Label facilitating the prepaid engine in the background. <\/p>\n\n\n\n

Capitec then launched Capitec Connect, a Mobile Virtual Network Operator (MVNO) roaming off Cell C’s network. <\/p>\n\n\n\n

Capitec Connect has seen massive growth, reaching 1.5 million subscribers by the end of 2024, with a current run rate of 180,000 monthly subscribers.<\/p>\n\n\n\n

Short said that this benefits Cell C, as every Capitec Connect subscriber becomes a Cell C subscriber. <\/p>\n\n\n\n

\u201cWith Capitec’s 22 million banking customers as a potential subscriber base, the growth runway is substantial.\u201d <\/p>\n\n\n\n

Cell C now supports 13+ MVNOs, including major brands like Shoprite, FNB, and Standard Bank.<\/p>\n\n\n\n

MVNOs can be attractive for operators, as another party handles the marketing and customer acquisition, resulting in lower operating costs.\u00a0<\/p>\n\n\n\n

Cell C also benefits from network share agreements with MTN and Vodacom, while maintaining its own spectrum. This allows strong network quality without capital-intensive infrastructure. <\/p>\n\n\n\n

Short also noted that management quality at Cell C has improved significantly in recent years, with six of the eleven C-suite executives\u2014including the CEO\u2014joining from Vodacom in the last 20 months.<\/p>\n\n\n\n

Strong future <\/h2>\n\n\n
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Flagship Asset Management Global Portfolio Manager Philip Short<\/figcaption><\/figure><\/div>\n\n\n

Blue Label\u2019s core digital token business generates R800 million profit annually and remains cash generative. <\/p>\n\n\n\n

Although the complex accounting structure for the recapitalisation of Cell C in 2022 deterred many investors, Smith said it created opportunities. <\/p>\n\n\n\n

Cell C has negative equity, meaning its profits cannot be recognised in Blue Label\u2019s financials. As the turnaround continues, this will change.<\/p>\n\n\n\n

Following the restructuring, Cell C is estimated to generate R2.5 billion EBITDA with roughly R2 billion net profit, benefitting from R28 billion in tax losses over the next five to ten years and no long-term debt. <\/p>\n\n\n\n

\u201cFor a debt-free company with double-digit earnings growth, an asset-light business model, and likely dividend payments being initiated, applying a conservative 10x P\/E multiple suggests Cell C could be valued at R20 billion,\u201d Smith said.<\/p>\n\n\n\n

Blue Label without Cell C generates R700 billion in net profit, and is worth roughly R7 billion using similar multiples. <\/p>\n\n\n\n

The combined sum-of-parts valuation reaches  R27 billion compared to Blue Label\u2019s current R13 billion market cap. <\/p>\n\n\n

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Best and worst performing shares since September 2023 <\/figcaption><\/figure><\/div>\n\n\n
\n","protected":false},"excerpt":{"rendered":"

Cell C is undergoing a massive restructuring, which could unlock serious value for the mobile operator and its parent Blue Label.<\/p>\n","protected":false},"author":95,"featured_media":821982,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[6064,42],"class_list":["post-832859","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-opinion","tag-blue-label","tag-cell-c"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/832859","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=832859"}],"version-history":[{"count":8,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/832859\/revisions"}],"predecessor-version":[{"id":836264,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/832859\/revisions\/836264"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/821982"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=832859"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=832859"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=832859"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}