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Blue Label share price plummets after Cell C letter
 

Cell C recently published an open letter stating that the company would implement a new business plan to improve its current position.

 

CEO Douglas Craigie Stevenson said in the letter that the company faces financial and other challenges, and will implement a new business plan which will simplify its business model.

 

“We have implemented significant austerity measures and have cut costs which do not contribute to revenue-generating activities, including a review of all contracts to ensure alignment with business priorities and a hiring freeze,” he said.

 

“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.”

 

Blue Label Statement

 

Following the publication of this letter, the share price of Blue Label Telecoms – Cell C’s biggest investor – has plummeted by just under 10% as investors grow concerned over the state of the mobile operator.

 

Blue Label Telecoms has published an announcement attempting to placate investors in the wake of the Cell C letter, stating that “no material concerns or issues have been uncovered as a result of Cell C’s new management”.

 

“In anticipation of the transaction resolving the liquidity position at Cell C, and launching the new, improved operating model, Cell C’s management and board are ensuring that Cell C is sufficiently geared to run the business as required,” Blue Label Telecoms stated.

 

“Blue Label and the Buffet Consortium are fully apprised of Cell C’s drive to effectively and efficiently utilise all of its network, technology and human capital assets, and are supportive of management’s initiatives.”

 

Blue Label said it is looking forward to advising shareholders on the progress of transactions, which it said are currently at an advanced stage.

 

 

From the mybb article: https://mybroadband.co.za/news/business-telecoms/313167-blue-label-share-price-plummets-after-cell-c-letter.html

 

 

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So it seems the market is really liking this Chinese buying CELL C rumor because Blue Label's stock just went up 12% today.

I still don't quite understand all of this, what does it mean when a company writes of the debt like Blue Label did with CELL C and why is CELL C booming a good thing for Blue Label after writing off the debt?

https://www.iol.co.za/business-report/companies/blue-labels-share-price-soars-on-rumours-of-china-mobiles-bid-for-cell-c-34381615


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Cell C is planning to move its complete network to MTN and essentially become a high-level mobile virtual network operator (MVNO) as part of its turnaround strategy.

 

This is the word from Cell C CEO Douglas Craigie Stevenson, who was discussing the company’s plans with the Financial Mail.

 

Cell C is facing a challenging financial future after it recorded an after-tax net loss of R8.03 billion for the year ended 31 May 2019.

 

Blue Label Telecoms co-CEO Brett Levy said they drew a line in the sand by writing off their entire investment in Cell C to zero.

 

Despite this write-down, Levy remains upbeat about the mobile operator’s prospects, especially with the planned recapitalisation of Cell C through an equity partner.

He said that the recapitalisation will address Cell C’s debt problem and help the company to become profitable.

 

Moving Cell C’s entire network to MTN

In his interview with Financial Mail, Craigie Stevenson said Cell C is negotiating a new roaming deal with MTN which will see it carry all of Cell C’s traffic.

 

This new roaming agreement will also see Cell C hand all of its towers over to MTN, which means it will no longer run its own network.

 

This radical move means that Cell C will essentially become a high-level MVNO without its own network infrastructure.

 

This will remove the need for Cell C to invest billions in its network and allow it to use this money for operational expenses.

 

Cell C’s plan to move its network requirements to MTN and become a large MVNO has been confirmed by an executive close to the negotiations who asked not to be named.

 

He said such a deal would make financial sense for MTN and Cell C and allow the smaller operator to become more sustainable.

 

Craigie Stevenson said Cell C cannot carry on with its “capital-intensive model”, and that this deal with MTN would entail substituting capital expenditure for operational expenditure.

 

Since Cell C will use MTN’s network to serve its customers, it would allow the company to compete “on the basis of having the same geographical footprint and quality of service”.

 

Craigie Stevenson told the Financial Mail that the deal with MTN is expected to be finalised by the end of October.

 

Cell C has a bright future – Craigie Stevenson

Craigie Stevenson remains upbeat about Cell C’s future considering the value of the company’s assets.

 

He said that Cell C had valuable spectrum, a large customer base of 16 million active users, a wide distribution network, and a valuable brand – all of which it could leverage to improve its position.

 

The Cell C CEO said they are getting rid of costs, getting more efficient, and “understanding what a performance culture is all about”.

 

He said they are well aware that Cell C needs to be more efficient than Vodacom, MTN, and Telkom to recover and improve its position going forward.

 

From MyBroadband


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