JSE-listed Blue Label Telecoms has taken a decisive step in its troubled, long-running association with Cell C, reversing a multibillion-rand impairment previously recognised against its stake in the mobile operator.

The move reflects a marked improvement in Cell C’s equity valuation and signals Blue Label’s confidence in the mobile operator’s recovery trajectory. The move comes ahead of a possible listing of Cell C as soon as 2026, which has helped lift Blue Label’s share price significantly this year — though the shares fell back sharply on Wednesday, tumbling more than 17% following publication of its annual results after running hard this year: up by 172% year to date to Tuesday, prior to the release of the full-year numbers.

The impairment, first recorded in 2019 when Cell C’s balance sheet was under severe strain, was partially reversed two years ago (R962.5-million). With Cell C’s fortunes stabilising following its recapitalisation, Blue Label has now written back the remaining balance, effectively restoring the value of its investment on the group’s books.

According to Blue Label, the reversal was driven by several factors, most notably Cell C’s return to profitability in the current year. With this adjustment, Blue Label has now fully recognised its share of all historical losses linked to Cell C.

The reversal had a profound impact on Blue Label’s reported earnings. Headline earnings for year ended 31 May 2025, reported on Wednesday, surged more than sixfold to R4.1-billion, while core headline earnings — excluding extraneous items — climbed 258% to R2.43-billion. The group’s net profit after tax soared to R2.5-billion from R647-million a year earlier.

Beyond accounting adjustments, the move is strategically significant. Blue Label has signalled its intent to restructure its interests with a view to listing Cell C separately on the JSE, allowing investors to assess the operator on a standalone basis. The recently announced integration of Comm Equipment Company into Cell C forms part of this plan, consolidating responsibility for its post-paid base and supply chain.

Difficult chapter

For Blue Label, the reversal closes a difficult chapter of impairment charges and sets a more optimistic tone for its Cell C investment. Whether Cell C can sustain profitability in South Africa’s cutthroat telecoms sector remains the real test, but Blue Label’s books now tell a story of recovery rather than retreat.

Read: Blue Label Telecoms to change its name as restructuring gathers pace

Blue Label reported revenue of R14.1-billion for the year to 31 May 2025, down 4% year-on-year, though on a gross basis (including electricity, vouchers and ticketing) turnover rose 7% to R96-billion.

Gross profit increased 2% to R3.38-billion, with margins expanding to 24.02% from 22.57%, supported by higher Pinless top-up and electricity sales.

The reversal of the R1.56-billion impairment related to Cell C significantly boosted earnings, helping headline earnings per share climb to R4.56, from 74c in 2024. Core headline EPS, excluding once-offs, rose 256% to R2.71, underlining a strong underlying performance.

TCS | Signal restored: Unpacking the Blue Label and Cell C turnaround

Blue Label’s share price has jumped by 172% since the beginning of the year as investors have increasingly warmed to the turnaround at Cell C, being led by former Vodacom executive Jorge Mendes. – © 2025 NewsCentral Media

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