Blue Label Telecoms has secured an additional 10% economic interest in Cell C through its subsidiary, The Prepaid Company (TPC). This deal was made in exchange for settling Cell C’s outstanding debt to Dark Fibre Africa (DFA).Blue Label Expands Its Stake in Cell C with a 10% Acquisition
DFA is a key player in South Africa’s open-access fibre infrastructure sector. It funds, constructs, installs, manages, and maintains networks that support metro and long-haul telecommunications traffic. Many of the country’s mobile and fibre network operators rely on DFA’s wholesale services to expand their coverage and improve their offerings.
For mobile operators like Cell C, DFA plays a crucial role in laying fibre to their towers.
How the Deal Came Together
In its half-year financial results (ending 30 November 2024), Blue Label outlined how this transaction was structured. Cell C’s debt was originally transferred in 2022 to a newly created special-purpose vehicle, known as SPV5, in exchange for a 10% stake. This 10% shareholding remains the only asset of SPV5.
TPC has committed to lending SPV5 a total of R275 million over a two-year period (December 2024 – December 2026) in return for a claim of R699 million. SPV5 will use this R275 million loan to fully settle Cell C’s debt to DFA.
In return, Cell C has issued 10% of its share capital to SPV5. These shares were then pledged to TPC as security for the loan.
Upon the settlement of the R699 million claim, TPC will also have the right to receive 50% of any economic benefits SPV5 generates beyond this amount.
The Payment Plan
To finalize the transaction, TPC and Blue Label have structured the debt repayment in phases:
- R100 million by 31 December 2024
- R100 million by 31 December 2025
- R50 million by 31 December 2026
- An additional R25 million by 31 December 2026 (dependent on certain liquidity events)
Blue Label also confirmed that it has issued a guarantee on behalf of “the lessor” (DFA) for this debt repayment, while TPC has formally committed to providing the repayment funds.
SPV5 is obligated to repay TPC using proceeds from any future share sales or dividends. Additionally, TPC is entitled to an extra R424 million plus 50% of the fair value of SPV5’s 10% stake in Cell C, provided the total proceeds exceed R699 million.
Since SPV5’s only asset is its stake in Cell C, any repayment will depend on whether these shares are sold or if dividends are earned.
What This Means for Control of Cell C
As of 31 December 2024, TPC now effectively holds an additional 10% economic interest in Cell C, with a cap set at the repayment amount.
Blue Label confirmed that this investment would be equity accounted (subject to the cap), alongside TPC’s existing 63.19% stake in Cell C.
However, SPV5 is restricted from selling its Cell C shares without TPC’s approval. Despite this, TPC does not have any voting rights over these shares.
If SPV5 defaults on its obligations, TPC could acquire direct ownership of the 10% stake in Cell C as repayment for its loan. However, such an acquisition would require approval from South Africa’s Competition Commission and Icasa (Independent Communications Authority of South Africa), as it would grant TPC full control over Cell C.
Blue Label also noted that the approval process for its acquisition of control over Cell C is nearing completion.
- In January 2025, Icasa approved the transfer of Cell C’s spectrum, network, and operating licenses to TPC.
- In April 2024, the Competition Commission recommended that the Competition Tribunal approve the transfer of control.
Financial Implications for Blue Label
TPC’s loan commitment to SPV5 was previously recorded as a derivative liability (valued at R7 million as of 30 November 2024 and 31 December 2024). However, this liability was derecognized on 31 December 2024 and reclassified as part of the acquisition cost of its additional stake in Cell C.
The remaining funding obligations to SPV5—amounting to R148 million as of 31 December 2024—were added to the total investment cost, with a corresponding liability recorded under SPV5.
Due to previously unrecognized equity-accounted losses linked to Cell C, the total R241 million increase in the cost of investment was recognized as a loss in Blue Label’s income statement. This move offsets the balance of previously unrecognized losses in the company’s books.
Securing Additional Financing
To support this investment, TPC secured a new short-term loan facility from Rand Merchant Bank (RMB) in December 2024. The loan, valued at R311 million, carries an interest rate of Prime + 1% and was initially set to mature on 28 February 2025.
However, TPC is currently finalizing an extension that will push the maturity date back by 18 months, with repayments set to begin in equal monthly installments starting 31 March 2025.
