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CELL C’S RECAPITALISATION IS CONCLUDED

Thursday, 22 September 2022

Thursday, 22 September 2022 - Blue Label Telecoms (JSE:BLU), today updated the market that it has concluded binding long-form agreements (“Umbrella Restructure LFA’s”) with Cell C and various Cell C financial stakeholders, including certain shareholders and creditors of Cell C.  In addition, all CP’s (conditions precedent) to the agreements have been met. 

In mid-2019, Cell C embarked on a turnaround strategy, focusing on operational efficiencies, reducing operational expenditure, and optimising traffic. This included a move away from a capital-intensive build-and-own network model to an infrastructure sharing model which provides variable operational expenditure and is scalable. Together with the recapitalisation of the current debt structure, it will result in a significant improvement of liquidity and ensure the long-term sustainability of Cell C.

Commenting on the significance of the transaction, Douglas Craigie Stevenson, Cell C CEO says;

“The recapitalisation was the final and critical pillar of Cell C’s turnaround strategy; deleveraging the balance sheet, providing liquidity to operate, and putting the company on a trajectory of growth and long-term sustainability.”

“We are immensely pleased and humbled to have received the support of our many stakeholders, in particular our shareholders, who showed belief in our new model and bought into the business strategy.  We acknowledge our infrastructure partner for their commitment to ensuring a new era of network co-operation through this long process and their unwavering support. We thank our customers for their patience.”

“Day 1 post recap Cell C will have achieved a significant reduction in the debt of the business to enable us to move forward and make the business more streamlined as a new, reinvigorated, and fit-for-purpose entity to compete in the dynamic and changing telco landscape. We are well-placed to play in a market that is now made up of infrastructure buyers and sellers.”

“I can say with humility to all South Africans, Cell C is ready to invest in offering our customers  great value - which has been a hallmark of our legacy for more than 21 years - but now we can also truly claim to have a quality network with access to more than 8775 sites, 96% of which are LTE enabled as at end August 2022 and more to come by the end of 2023.”

“In the short-to-medium term our operational focus will be to finish the implementation of the network migration by end 2023 to get us to 14 000 sites, bring to market innovative product offerings specifically on prepaid, a new way of doing business and the ability to make significant moves in the wholesale business; along with investing in key technology projects aligned to our strategy, pursue our ambition to become a digital business, and build a high-performance culture with the digital skills sets for our employees.  We have a clear path for our next journey.  We will not settle, because change is part of our DNA at Cell C, and we believe we have the power to change your world.”

The Transaction
The construct of the transaction is in the form of new money to restructure Cell C’s financial and operational liabilities and stabilise the company. 

The transaction has been summarised below.  For full details please refer to BLT SENS announcement.

Cell C’s debt restructure

  • To facilitate the restructuring of Cell C’s debt owed to certain secured lenders totalling R7.3-billion, (fixed as at November 2019), Blue Label together with other debt providers will provide liquidity via a secured loan of R1.46-billion;
  • A portion of R1.03-billion of this debt funding will be used to pay out the secured lenders as per the accepted compromise offer of 20c for every R1 of debt;
  • Secured lenders who have elected to remain invested in Cell C will loan an amount equal to the 20c received from the compromise offer under a new loan arrangement referred to as the Reinvestment Instrument;
  • This new loan arrangement will be interest bearing, secured and give an aggregate capital face value equal to 2,75 times (or 55c) of the amount advanced;
  • All participating lenders in the new loan will be entitled to share pro rata in a fresh issue of ordinary shares in Cell C at a nominal value.  All current shareholders will dilute proportionately to allow for this new issue of ordinary shares; and
  • The Prepaid Company (TPC), a Blue Label subsidiary, will hold 49,53% of shares in Cell C after completion of the restructuring;
  • Additionally, an amount of R1.1-billion owed by Cell C to Comm Equipment Company (a wholly owned subsidiary of TPC) will be deferred and repaid in equal monthly instalments over 60 months.

Cell C’s working capital requirements (or liquidity):

  • TPC will purchase Cell C prepaid airtime to the value of R1.2-billion (including VAT);
  • In addition, TPC will purchase four quarterly payments of airtime to the value of R300-million (including VAT); The first payment will be at the beginning of the 13th month following the recapitalisation of Cell C.
  • In conjunction with other third parties, TPC will purchase certain levels of stock from Cell C based on an agreed monthly schedule or in line with market requirements.
  • TPC will raise R1.6-billion of the required funds from financial institutions, the settlement of which is to be repaid over a 24-month period in equal bi-monthly instalments.

Cell C will hold a market update on Thursday, 29 September and host a roadshow w/c 3 October.



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