Blue Label Secures New R1.4 Billion Cell C Loan Facility Through Airtime

It is believed that Cell C used its own airtime to enable Blue Label to buy the 45% shares in the struggling company.

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Airtime
Black cordless phone with written AIRTIME on the screen. fendyrodzi/ Shutterstock.com

The occasionally controversial JSE-listed company Blue Label Telecoms, a parent company of Cell C, has once again used airtime to secure finance for the country’s struggling mobile phone operator.

Blue Label Telecoms announced on Tuesday that Cell C procured R1.4 billion of funding and did’nt provide any further details.

However, the JSE-listed company on Wednesday disclosed that the funding has been procured from a consortium of financial institutions for a tenure of 12 months, secured by airtime to the value of R1.75 billion.

“In the event of default, TPC has undertaken to purchase such inventory from the consortium on a piecemeal basis over a specified period that has been agreed upon,” Blue Label Telecoms said in a JSE statement.

“Any shortfall of this purchase would be in lieu of purchases made from Cell C within that period. The payment terms as between TPC and Cell C on the normal Cell C trading account would be extended by 120 days, ensuring that TPC will not be at any risk of having to purchase airtime in excess of its monthly requirements.”

The use of airtime to conclude transaction seems to be gaining traction between Cell C and Blue Label Telecoms.

Blue Label Telecoms
Blue Label Telecoms

On 2 August 2017, Blue Label Telecoms, through its wholly owned subsidiary, The Prepaid Company (TPC), acquired 45% of Cell C for R5.5 billion.

It is believed that Cell C used its own airtime to enable Blue Label to buy the 45% shares in the struggling company. For more read: How Cell C was bought with its own airtime.

That probably makes Cell C the first company ever to be bought, in part, with its own airtime.

Mail & Guardian argued that this also raises questions about the transaction, so much so that Cell C’s own black empowerment shareholders, CellSaf, believe the vast and complicated deal, which has been portrayed as a way to save Cell C from ruinous debt, may, in fact, have amounted to a corporate magic trick.

Furthermore, on Tuesday Blue Label reveaved that Cell C is in a process of raising a further R1.4 billion in vendor financing and R1 billion from what it terms “shareholder support”.

The company told TechCentral website that Blue Label that of the available facilities for Cell C, “R1.4-billion is now in place and has been fully drawn, replacing R1-billion of existing facilities”.

“In order to complete the capital expenditure programme, a vendor-backed facility of up to R1.4-billion is being raised for 2019. The shareholder-backed facilities are available to Cell C as a soft agreement for liquidity,” it told TechCentral.

“This is not set in stone and imposes no further obligation on Blue Label and is over and above the current needs of Cell C. Blue Label previously loaned R1.4-billion to Cell C, which was paid back at the end of July 2018. Blue Label has only committed a further loan of R300-million (shareholder backed) should it be required over the R1.4-billion in vendor financing. It is not anticipated to be needed.”

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