South Africa: Blue Label's Expensive Adventure


The R6bn write-down of its investment into Cell C and subsequent destruction of shareholder value raise questions about Blue Label's capital allocation strategy. That said, there appears to be a plan to save Cell C, at least, for which shareholders will be grateful.

Blue Label Telecoms, the entrepreneurial distributor of airtime, electricity tokens and other online services, must be rueing the expensive acquisition spree of 2017 that saw it acquire a 45% stake in Cell C for R5.5-billion, 3G Mobile for R1.9-billion and 60% of Airvantage for R151-million.

On Thursday 19 September, about two years later, Blue Label has written that down to precisely nothing, and warned the market that its core headline earnings for the year ended 31 May 2019 (which exclude once-off items) will decrease by an estimated 403 cents per share, more than 20% when compared to the previous year.

Earnings are being dragged downwards by the poor performance of Cell C, whose inability to close its books delayed the release of Blue's annual results which were due at the end of August, earning it censure from the JSE.

Cell C losses and impairments accounted for R2.86 of the losses announced, other downward adjustments accounted for 91c,...

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