Embattled JSE-listed Blue Label is working to assure investors that mobile operator Cell C is able to operate as required and that no material concerns have emerged as a result of the new management’s “deep dive” into the operator’s business practices.
Earlier this week, Cell C interim CEO Douglas Craigie Stevenson, appointed in March, published an open letter that had sent Blue Label’s shares further into a downward spiral.
Stevenson explained that, following 120 days of an intense review, seeking to right-size and optimise the business, Cell C has emerged with a “clear direction” to execute and implement a new business plan to simplify the business model; pursue a recapitalisation to optimise the capital structure; extract greater value from its existing roaming agreement; and optimise network revenue and use.
Significant austerity measures have already been pursued and costs have been cut, while a review of all contracts is under way to ensure alignment with business priorities and a hiring freeze has been instituted.
“The goal for Cell C is to become significantly better focused on operational performance, sound business ethics and accountability throughout the business,” he explained.
To this end, Cell C announced the appointment of attorneys Bowmans to investigate any parts of the business where the company suspects there may be irregular business practices.
PwC has been hired to undertake a full procurement audit and review of the operator’s processes.
The group also implemented a range of initiatives across the business to improve and meet the requirements of the King IV Code of Corporate Governance, including driving greater transparency to the board.
“Cell C has a zero-tolerance policy towards illegal or unethical activity and have encouraged employees to use the independent whistleblowers service to anonymously report irregularities or illegal activities,” he said.
Post the open letter, Blue Label issued a statement aimed at putting its now seemingly nervous investors at ease as its share price once again tumbled on Thursday.
“In response to shareholder concerns raised as a result of Cell C’s open letter published on July 10, Blue Label wishes to reassure shareholders that no material concerns or issues have been uncovered as a result of Cell C’s new management conducting a deep dive into the business practices of Cell C in a drive for efficiencies,” Blue Label said in the statement to shareholders.
“This is an ongoing process and shareholders will be updated as progress is made.”
Blue Label also assured the market on the transactions, which are at an advanced stage, that would resolve the liquidity position at Cell C.
“Blue Label and the Buffet Consortium are fully apprised of Cell C’s drive to effectively and efficiently use all of its network, technology and human capital assets, and are supportive of management’s initiatives.”
Further, Cell C’s management and board are ensuring that Cell C is sufficiently geared to run the business as required.
“We have engaged in discussions with our staff and the company’s union in an open and transparent manner and adhering to all legal requirements,” said Stevenson.
He further went on to assure that Cell C is focused on stabilising relationships with its labour force and had implemented a signed recognition agreement and formal engagement structures.
Cell C is also actively communicating with employees on the direction and state of the business; re-emphasised that noncompliance with policies and procedures would not be tolerated; and had taken meaningful steps to inculcate a transparent performance culture aligned with the business strategy.
Deloitte has been appointed as as independent financial restructuring advisers to assist in optimising business processes.
“I want to emphasise that Cell C is strategically positioning itself and we are using our best efforts to be a strong participant in the industry, I firmly believe we are on the right track,” he concluded.