Cell C Plans Johannesburg Share Sale by Early 2020 to Fund Deals

(Bloomberg) -- Cell C Pty Ltd. is planning a share sale in its home city of Johannesburg by the first quarter of 2020 as South Africa’s third-largest wireless company seeks funds for acquisitions.

The exact timing of an initial public offering will depend on market conditions, Chief Executive Officer Jose Dos Santos said in an interview Tuesday. In the meantime, the carrier is looking at potential fiber-to-home deals to boost its internet and data-services businesses, he said.

“The fundamental thing is that we raise additional capital,” the CEO said. “We have some nice acquisitions that we are looking at. We are moving into media and content, and we have a strong fiber-to-home play.”

An IPO would represent a logical next step for Cell C, which emerged earlier this year from a protracted debt-restructuring rescue plan that led to Blue Label Telecoms Ltd. taking a 45 percent stake. Dos Santos has pledged to increase network spending and take the fight to larger South African rivals MTN Group Ltd. and Vodacom Group Ltd., which dominate the country’s telecommunications market.

Making Losses

However, Cell C remains unprofitable, reporting a loss of 645 million rand ($44.7 million) in the half year through June. Total subscribers rose by 4 percent to 16.3 million, compared with Vodacom’s 43 million. Blue Label shares slumped as much as 13 percent, the most since February, and traded 8.4 percent lower at 7.67 rand as of 4:02 p.m. in Johannesburg.

“Cell C results today showed that they are still struggling and that another cash injection will be needed soon,” Ron Klipin, an analyst at Cratos Capital, said by phone.

Dos Santos countered that Cell C was still in its first year following the recapitalization and the company is ahead of targets laid out in its business plan. Among highlights was a 20 percent rise in data revenue -- taking it above voice sales for the first time.

Johannesburg IPOs have been scarce of late, with wealth manager Quilter Plc -- formerly part of insurer Old Mutual -- the most recent successful listing in June. Libstar Holdings Pty Ltd., a maker of cheese and honey, sold stock at the bottom of its price range in May and has since lost almost a quarter of its value. In telecommunications, three African tower companies have abandoned plans for IPOs this year.

With faster and higher-quality internet services such as 5G coming on stream, South Africa’s smaller telecommunications companies may look to team up, Dos Santos said. Cell C rejected a proposal from Telkom SA SOC Ltd., the country’s former phone monopoly and no. 4 mobile-phone company, in favor of the Blue Label deal earlier this year, but Dos Santos said such a deal may make sense in the future.

©2018 Bloomberg L.P.