Blue Label plays down Cell C letter


Blue Label plays down Cell C letter

Published Date: 2019-07-12 | Source: Stephen Gunnion | Author: Stephen Gunnion

Blue Label plays down Cell C letter

Cell C's biggest shareholder says no material concerns or issues have been uncovered in a "deep dive" into the network operator's business practices.

Blue Label Telecoms moved to allay concerns after an open letter by Cell C's interim CEO raised concerns about governance at the network operator, sending its shares as much as 15% lower. Blue Label owns 45% of Cell C.

In an open letter to stakeholders, interim CEO Douglas Craigie Stephenson, who replaced Jose dos Santos in March, said Deloitte had been appointed as independent financial restructuring advisors to assist it in optimising its business processes. It hired attorneys Bowmans to investigate any parts of the business where it suspected there have been irregular business practices. Auditors PwC were also appointed to do a full procurement audit and a review of its processes.

Craigie Stephenson's mandate was to right-size and optimise the business amid a number of challenges, including financial constraints. Following a 120-day review he said management had decided to implement a new business plan aimed at simplifying its business model; pursuing a recapitalisation to optimise its capital structure; extracting more value from its existing roaming revenue, and optimising its network revenue and usage.

Blue Label said Cell C's management and board were ensuring it was sufficiently geared to run the business as required in anticipation of a transaction aimed at resolving its liquidity position. It said it and the Buffet Consortium, which took a minority stake earlier this year, were "fully apprised of Cell C's drive to effectively and efficiently utilise all of its network, technology and human capital assets, and are supportive of management's initiatives."

Blue Label bought 45% of Cell C for R5.5 billion in 2017 in a move that was aimed at reducing the network operator's debt from R23 billion to R6 billion and giving Blue Label a platform to enhance the distribution of its products. However, there have been ongoing concerns over its liquidity. Last month, S&P Global Ratings lowered its rating on Cell C to SD (selective default) from CCC after it renegotiated the terms of certain aspects of its debt.

Blue Label's shares retraced some of their losses to close 9.7% lower at R3.52.

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