JSE-listed Blue Label Telecoms is defending its decision to acquire 45% of formerly distressed mobile operator Cell C, after months of negative perception from the market weighing on the technology firm’s share price on the JSE.
Following the release of Cell C and Blue Label’s financial results in August, the group’s shares on the JSE plunged to below R7 a piece – its lowest level in years and almost to listing levels of R6.75 a share.
However, Blue Label joint CEO Brett Levy reassures the market that the R5.5-billion acquisition of South Africa’s third-largest mobile operator was a well-thought-through deal that will deliver “tremendous value” in the long term.
“We have proven ourselves in Blue Label – give us a chance to prove ourselves with Cell C,” he says, adding that both Blue Label and Cell C are actually doing well, with the latter emerging as a “growth story”.
“We have a network, distribution [platform], procurement, products and the technology [to back all this] – we have it all in our ecosystem. Our prospect is this: [we] put it all together and let the engine spit out the future.”
He believes that the company is on the right track with Cell C and that the “punishment does not fit the crime”, referring to the negative sentiments from the market over the last few months.
“Give us a chance to be guilty before you sentence us,” he says.
Joint CEO Mark Levy highlights that, realistically, it takes time, effort and money to implement a good strategy.
Despite this, eight months after the acquisition, Cell C is turning around, with the group achieving “every single line item” targeted for the period.
The mobile operator posted earnings before interest, taxes, depreciation and amortisation (Ebitda) growth of 16% to R2.4-billion, as net loss after tax improved 33% to R645-million during the first half of 2018 from a net loss of R968-million in the comparable period last year.
Cell C showed a year-on-year rise of 5% in revenue to R7.8-billion and an 11% hike in service revenue to R6.9-billion for the six months to June 30.
Total subscribers for the six months under review increased 4% to 16.3-million, while total active data subscribers contracted 4% to 12.1-million.
Data revenue increased 20% to R2.96-billion, while data traffic increased 62% year-on-year.
Data revenue contributed 52% of mobile revenue, compared with 46% the previous year, despite the effective price of data per megabyte decreasing by more than 28% year-on-year.
The network capital expenditure of R1-billion during the half-year, which equated to 13% of revenue and a rise on the R494-million reported in the comparative half-year in 2017, was strategically focused on the provision of mobile voice, data services and content through a combination of a long-term-evolution (LTE) Advanced network that overlays the company’s LTE and third-generation and second-generation networks.
“We have focused our efforts on innovation and improving our network coverage and quality, as well as customer experience, and will continue to build on our strong foundation, with revenue projected to perform promisingly,” says Cell C CEO Jose Dos Santos.