Shares in Blue Label Telecoms have continued to dive after a week to forget for the JSE-listed group.
On Thursday, shares in Blue Label Telecoms, which owns half of Cell C, tumbled 7.43% to close at R2.74 a share.
Blue Label Telecoms’ share price reached a new low of R2.67 after dropping 1.84% by 13:07 today, pushing its market value to R2.4 billion.
Back in October 2016, Blue Label Telecoms’ market value shot up to R19.3 billion when the firm invested in Cell C.
The downward spiral of Blue Label Telecoms shares is attributed to the woes of Cell C, South Africa’s troubled mobile operator.
Last week, Cell C defaulted on interest payments of loans due July 2019 on certain bilateral loan facilities totalling 40% of its total debt at Dec. 31, 2018.
This resulted in rating agency S&P Global Ratings lowering the company’s rating to default.
The mobile phone operator is struggling to service an almost R9 billion debt load.
The rating agency’s move to downgrade the rating on Cell C to ‘D’ (default) from ‘SD’ (selective default) and lowering rating on the company’s senior secured term loan to ‘D’ from ‘CC’. came after Cell C failed to make about R194 million in interest payments due last month.
“It also reflects our expectation that the company will not make these payments within the 30-day grace period due to its decision to suspend future payments,” said the rating agency.
“We believe there is an increased likelihood that Cell C will be unable to repay all or substantially all of the obligations as they come due unless it is able to restructure its debt and recapitalize its balance sheet.”
On the other hand, Blue Label Telecoms has delayed the publication of its 2019 financial statements to evaluate its investment in Cell C.