JSE-listed Blue Label Telecoms, which is in talks to buy 35% of mobile operator Cell C, looks set to turn in a strong financial performance in the six months ended November 30 2015.
The company told shareholders on Wednesday that headline earnings per share are likely to be between 23% and 27% better than the interim period in 2014.
Core earnings, which it said represent its underlying financial performance, will rise by between 20% and 23%.
The positive trading update sent Blue Label’s share price rallying by more than 3% to R12.40/share in trading on the JSE on Wednesday afternoon. Shares closed 2.17% higher at R12.23.
Blue Label, which is South Africa’s biggest distributor of prepaid airtime, said the increase in earnings is mainly from organic growth. It was “underpinned by a hybrid of an expanded customer base supported by an enhanced bouquet of products and services afforded to it,” it said. “In addition, the company has continued to confine operational costs.”
The company will publish its results on February 24.
TechCentral reported in December that Blue Label has offered to buy 35% of Cell C, with which it has had a close working relationship for a number of years.
Under the deal, the company will inject R4 billion in new capital into the mobile operator as part of a major restructuring that will lead to current controlling shareholder diluting its stake from 75% to roughly 27% and its debt being reduced substantially to below R8 billion.
As part of the deal, Cell C employees will acquire a 30% stake in Cell C for R2.5 billion. The money to pay for this will be raised through a financial institution and the debt will then be paid down through dividend flow from Cell C over a period of years.
The news of the proposed deal came just weeks after Telkom walked away from making an offer to buy Cell C after concluding a due diligence investigation.
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