Cell C suffers large losses

After a long delay, Blue Label Telecoms [JSE: BLU] finally released its results for the year to end-May. Last week the JSE threatened to suspend the company’s shares because it has not yet released its results for the year to end-May. The JSE set a final deadline of September 30.

With revenue down 3% to R25.9bn, Blue Label reported a headline loss of 312.49c per share for the year to end-May. While Blue Label’s core business – including providing airtime, data starter pack and prepaid electricity services – remains profitable, Cell C, which suffered a trading loss of R1.56bn for the year, wreaked havoc on its results. Including write-offs, Cell C contributed a loss of R3.6bn to Blue Label, which owns 45% in the mobile operator.

The debt-laden Cell C is struggling, with MTN recently writing off R211m in unpaid debt from Cell C. Cell C is cutting costs and implemented a hiring freeze. On top of that, the company is also investigating its employees for irregular business practices. Last month, Cell C received R1.4 billion of funding from a consortium of financial institutions, secured by airtime to the value of R1.75 billion. Blue Label says the contemplated national roaming agreement will result in substantial cost savings for Cell C by reducing network and capital expenditure when implemented.

On Wednesday evening, Blue Label announced it would be selling its interests in Blue Label Mobile and 3G Mobile.

The ability of Blue Label to continue as a going concern is dependent on whether these (and other) transactions entered into subsequent to year-end noted above, as well as the continued support from financial institutions, the results noted.

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