September 19, 2019 / 4:41 PM / a month ago

UPDATE 1-S.Africa's debt-ridden Cell C worthless, biggest shareholders say

(Adds Cell C comment)

JOHANNESBURG, Sept 19 (Reuters) - Payments company Net1 UEPS Technologies said on Thursday it had written down to zero the value of its stake in South Africa’s third-largest mobile network, Cell C, alongside the carrier’s largest shareholder, Blue Label Telecoms.

Blue Label has, as the head of a group of investors including Net1, been trying to dig Cell C out from under hefty debts since it purchased its stake in the carrier for 5.5 billion rand ($375 million) in October 2016.

In a statement, Net1 CEO Herman Kotze said the decision of both firms to impair the value of their investments in Cell C to nil would have no impact on Cell C’s operations or the proposed transactions it is pursuing.

“We believe that Cell C’s long-term prospects will significantly improve once it has been recapitalised,” he said.

Zaf Mahomed, Cell C chief financial officer, said the company was comfortable with its progress towards long-term competitiveness, managing its liquidity and restructuring its balance sheet.

“In addition, we are pleased with the improved performance in recent months and plan to update the market when we release our results within the next two weeks,” he said in an emailed statement.

Net1 recently delayed its annual results to wait for more clarity on developments relating to Cell C, in which a consortium is taking a minority stake.

Blue Label, which owns 45% of the carrier that has struggled to compete with bigger rivals MTN and Vodacom, has said it hopes the stake acquisition will bolster Cell C’s balance sheet.

It has had to defend its investment to shareholders concerned about the cost of keeping the carrier going, helping prompt a roughly 80% fall in Blue Label’s share price since the start of last year.

Its shares rose 6% on Thursday, however, following a trading statement in which it said its profits would fall by more than 20%, with Cell C’s trading losses and impairment of its property, plant and equipment contributing to the decline.

These were expected to drag its headline earnings per share - the main profit measure in South Africa - downwards by over 287 cents, it said. Underlying profits, which exclude this and other negative factors weighing on results, would rise, it said.

Net1 bought into Cell C in 2017, when it paid 2 billion rand for a 15% stake in the carrier.

$1 = 14.6648 rand Reporting by Emma Rumney; Editing by Dale Hudson and Mark Potter

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