Shares in Blue Label Telecoms, which owns 45% of Cell C, fell by 8% on Tuesday after the mobile operator reported half-year results to 30 June 2018 that showed a net loss after tax of R645-million.

Blue Label fell to an intraday low of R7.30/share, a decline of more than 11% from Monday’s closing price, bringing its decline since the start of the year to about 50%. The share is trading at levels last seen five years ago. It closed Tuesday’s trading session at R7.70.

Despite an improved operational performance — the net loss after tax was 33% less than the same period a year ago — Cell C continues to labour with high levels of debt on its balance sheet, even after its recent restructuring and recapitalisation.

Cell C’s service revenue was R6.9-billion, up 11%. Total revenue rose 5% to R7.8-billion. Data revenues improved by 20%, and the (still small) fibre-to-the-home business showed impressive gains.

Following Cell C’s recapitalisation, its long-term debt was R6.4-billion at the end of June, down from R17.9-billion a year ago. However, short-term debt rose to R1.5-billion from R417-million previously. Debt related to leases was R5.5-billion, up from R5.1-billion. Net debt including leases was R12.7-billion, down from R23.3-billion. Total interest payments in the half-year amounted to R952-million (previously R1.1-billion).

Cell C raised a new rand-denominated debt facility of R1.4-billion following its half-year results and said it is in the process of raising another R1.4-billion in vendor financing and a further R1-billion in “shareholder support”.

‘Shareholder support’ explained

In response to a question from TechCentral for clarity regarding the R1-billion of shareholder support, Blue Label said 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 said.

“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.”