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Cell C default sets shares sliding in South Africa's Blue Label

People chat in front of a reception with an electronic board displaying movements in major indices at the Johannesburg Stock Exchange building in Sandton Johannesburg, file. REUTERS/Siphiwe Sibeko

JOHANNESBURG (Reuters) – South Africa’s Blue Label Telecoms said on Tuesday that Cell C, the country’s third biggest mobile carrier in which it is the majority shareholder, had defaulted on a series of debt payments, triggering a fall of more than 12% in its shares.

Blue Label said in a statement that Cell C had defaulted on an interest payment for a $184 million note due in December as well as interest and capital repayments on bilateral loans from banks that were due in January.

Cell C was working to improve its liquidity and debt profile as well as its long-term competitiveness and the mobile operator was “committed to resolving the situation by agreeing to restructuring terms with its lenders”, Blue Label added.

Blue Label has been trying to dig Cell C out from under hefty debts since it purchased its stake in the carrier for 5.5 billion rand ($384 million) in October 2016.

It has had to justify the purchase to shareholders as Cell C’s prospects have failed to improve.

Cell C’s debts were just shy of 9 billion rand in the year to end-May 2019, its most recent financial statements show.

The carrier said in a statement the suspension of payments were part of its initiative to restructure its balance sheet, and that an expanded roaming agreement signed with Africa’s biggest mobile operator MTN would help.

“We will continue to engage with all stakeholders throughout this process and we believe we have made good progress,” Cell C CEO Douglas Craigie Stevenson said in a statement.

($1 = 14.3325 rand)

Reporting by Emma Rumney; Editing by Alexander Smith

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