The recapitalisation of embattled mobile operator Cell C has been concluded, marking the final and critical pillar of Cell C’s three-year turnaround strategy.

JSE-listed 45%-shareholder Blue Label Telecoms on Thursday said that it had concluded binding long-form agreements (LFAs), labelled the Umbrella Restructure LFAs, with Cell C and various Cell C financial stakeholders, including certain shareholders and creditors of Cell C.

All conditions precedent to the agreements have been met, the company said in a statement on Thursday.

Since mid-2019, Cell C’s turnaround strategy has focused on operational efficiencies, reducing operational expenditure and optimising traffic in an effort to deleverage its balance sheet and provide liquidity to operate.

The turnaround, in conjunction with the recapitalisation of the current debt structure, is aimed at ensuring the long-term sustainability of Cell C.

According to a statement released by Cell C, 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.

Cell C CEO Douglas Craigie Stevenson, summarising the transaction, says that Blue Label will provide liquidity, through a secured loan of R1.46-billion, to facilitate the restructuring of the R7.3-billion debt it owed to certain secured lenders, which was fixed as at November 2019.

Some R1.03-billion of this debt funding will be used to pay out the secured lenders as per the accepted compromise offer, through a vote on July 5, 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 interest-bearing, secured loan arrangement, referred to as the Reinvestment Instrument, which will provide 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,” he says.

Post the transaction, Blue Label subsidiary The Prepaid Company (TPC) will hold 49.53% of shares in Cell C after completion of the restructuring.

Further, R1.1-billion, owed by Cell C to TPC subsidiary Comm Equipment Company, will be deferred and repaid in equal monthly instalments over 60 months.

Meanwhile, to further assist Cell C with its working capital requirements, TPC will purchase Cell C prepaid airtime to the value of R1.2-billion, as well as purchase four quarterly payments of additional R300-million in prepaid airtime, with the first payment to start from the thirteenth 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 monthly instalments.

Cell C plans to hold a market update on September 29, followed by a roadshow from October 3.

“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,” says Craigie Stevenson.

Cell C now has access to more than 8775 sites, 96% of which are long-term evolution-enabled as at end August 2022.

“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," he explains.

“We are immensely pleased and humbled to have received the support of our many stakeholders, in particular our shareholders, our infrastructure partners who showed belief in our new model, bought into the new business strategy and supported the vision of the turnaround, and our customers for their patience.”