Cell C at the Centre of Blue Label Telecoms Delaying Financial Statements

The shares of Blue Label Telecoms continues to be battered over Cell C woes.

CELL C
CELL C

The publication of the 2019 financial year results of JSE-listed group Blue Label Telecoms will be delayed until late September.

Blue Label Telecoms informed investors on Monday that the delay is due to various issues related to Cell C.

The JSE-listed group is the largest shareholder of Cell C, South Africa’s troubled mobile phone operator.

The company informed investors that its financial results for the year ended 31 May 2019 will be released on SENS on 26 September 2019. The results had been expected to publish later this month.

“Blue Label’s audit for the year ended 31 May 2019 is substantially complete,” the company said on Monday.

“However, the group is currently in the process of determining the valuation of its investment in Cell C, incorporating the effects of the transactions that are currently in progress.

“The outcome will have an impact on the carrying value of the investment, the assessment of the remaining fair values of SPV1 and SPV2 (as detailed in the trading statement published on SENS on 22 February 2019) as well as the recoverability of the existing deferred tax asset within Cell C.”

Blue Label Telecoms added that an extensive process is currently being undertaken by Cell C management to perform an assessment of the extent of the impact that the above transactions will have on Cell C’s financial statements, which are currently being finalised.

Blue Label concluded a “binding term sheet” with the Buffet Consortium in terms of which it would become a minority shareholder, pending certain conditions being fulfilled. In February, Blue Label Telecoms said the Buffet Consortium wants to buy a minority shareholding in Cell C.

Last month, Blue Label Telecoms moved to reassure investors about the concerns about Cell’s prospects.

It said that no material concerns or issues have been uncovered as a result of Cell C’s new management conducting a deep dive into the business practices of Cell C in a drive for efficiencies.

“This is an on-going process and shareholders will be updated as progress is made.”

Previously, it emerged that Cell C’s management has finally accepted (publicly) that the company faces financial and other challenges.

The struggling mobile phone operator is planning to implement a new business plan which will simplify its business model, which will include a second recapitalisation of the company.

The company has appointed Deloitte as independent financial restructuring advisors, and Bowmans attorneys to “investigate any parts of the business where we suspect that there may be irregular business practices”.

The shares of Blue Label Telecoms continues to be battered over Cell C woes.

By 1520, Blue Label Telecoms was down 2.63% at R3.31 pushing the company’s market cap to R3.1 billion. The company’s shares have dropped 36% year-to-date and fell 6.5% in the past 30 days.

Cell C may also lock horns with its empowerment partner, CellSaf.

South Africa’s competition watchdog has spent two years investigating whether to declare the recapitalisation of Cell C as a large merger conducted by both Blue Label Telecoms and Net 1.

In June 2017, CellSaf – led by Zwelakhe Mankazana – submitted a complaint to the Competition Commission accusing Blue Label Telecoms and Net1 of trying to hijack and secure dominant (75%+) control of Cell C.

The deal was an attempt at corporate capture, said CellSaf at the time. The empowerment firm alleged in the complaint that the complicated web of transactions and contracts by Blue Label Telecoms and Net1 would give the companies full control of Cell C.

READ: Friday article: Cell C’s BEE Partner May Lock Horns With Blue Label Telecoms, Net 1

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