Is Cell C’s 2020 IPO Plan Up In The Air?

From face value, the company led by Brett and Mike Levy looks like is also not having deep enough pockets to enable Cell C to aggressively compete against its rivals - Vodacom and MTN plus new data players such as RAIN.

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Cell C logo
Cell C logo / Marketing Spread

In the wake of poor half-year financial results published on Tuesday, Cell C’s initial public offering (IPO) plans billed for 2020 increasingly appear uncertain.

Cell C reported a net loss of R645 million in the six months to end-June – an improvement of 33% compared to the R968 million net loss in 2017.

The mobile phone operator attributed the continued net loss to foreign exchange and financial instrument exposure.

In January 2016, the Sunday Times newspaper reported that the country’s third-largest mobile phone operator planned to position itself for a favourable listing over a few years.

“We think the markets will still be trying over the next two or so years, but we will use this time to make sure we have changed perceptions about this company and to ensure that there is an appetite to buy Cell C from a customer and listing perspective,” Cell C CEO Jose Dos Santos, was quoted as saying by the weekend newspaper.

Asked today to reaffirm its listing plans, Cell C said in an emailed response: “Cell C is still considering listing, subject to market conditions”.

But so far things are not looking pretty for Cell C.

The company’s balance sheet is not improving. It is hampered by high levels of debt and slowing customer acquisition, plus a reduction in new data customers.

Cell C’s total liabilities have increased by 5% to R19 billion in June 2018 versus R18 billion in the same period last year.

Its  long-term debt has been reduced to R6.4 billion from R17.9 billion, while short-term debt has more than doubled to R1.5 billion versus R417 million 

Cell C also disclosed that it has raised R1.4 billion in new debt facility and is in a process of raising R1.4 billion in vendor financing and R1 billion from what it terms “shareholder support”.

The poor performance of Cell C has negatively impacted Blue Label Telecoms, sending its share price tumbling since the JSE listed tech firm issued a recapitalisation circular in 2016. Since then Blue Label’s share price has halved and today the market also reacted negatively to Cell C’s published figures.

The company’s shares have already lost 36.6% in the past 90 days and tanked 44% in the year to date.

The market might also be signaling something is brewing at Blue Label Telecoms – maybe offloading its Cell C shares.

Tomorrow, Blue Label will publish its full-year results to 31 May 2018 and if its figures are bad the company’s share price might tank further. 

For now, Blue Label Telecoms is stuck with Cell C.

From face value, the company led by Brett and Mark Levy looks like is also not having deep enough pockets to enable Cell C to aggressively compete against its rivals – Vodacom and MTN plus new data players such as RAIN. But Blue Label is making more money from selling airtime and the unbanked South Africans.

At this stage, Cell C is far from attracting investors for its planned IPO.

Blue Label is yet to benefit from an upside it saw when it entered into a recapitalisation pact with Net 1, which owns 15% of Cell C. That’s how it looks but might not be true.

For now, it will be prudent for Blue Label Telecom’s to take off the table its listings plans for Cell C and focus on dealing with debts and the performance of the company.

The biggest question is who will continue to finance Cell C?

As a company competing with behemoths like MTN and Vodacom, South Africa’s third mobile phone operator is in fairly dark place.

Time will tell how long Blue Label Telecoms will hang on to its shares in Cell C.

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