Blue Label Telecoms (JSE: BLU) Shares Jumps 34%—Big Moves, Bigger Vision
Blue Label Telecoms’ share price rises 34% in 6 months. Strategic Cell C stake increase and debt reduction set stage for long-term growth.
Quick overview
- Blue Label Telecoms Limited is currently trading at ZAC 748.00, down 0.40% in the last session but has gained 34% over the past six months.
- The company increased its stake in Cell C to 63.19% and committed R275 million towards debt repayment, reflecting long-term confidence in Cell C's turnaround.
- Despite mixed interim results with flat earnings and a 4% revenue decline, Blue Label's diversified revenue base showed resilience with an 8% growth in non-core areas.
- Cell C's recovery, marked by 13% revenue and 87% EBITDA growth, supports a bullish outlook for Blue Label as it positions itself for future market opportunities.
Blue Label Telecoms Limited is trading at ZAC 748.00 and down 0.40% in the last session.
But if you zoom out, the picture looks much better, the share has gained 34% in the last 6 months. The rally is due to market confidence in the company’s strategy especially around Cell C despite the recent macro and political headwinds.
A key turning point was Blue Label’s deepening involvement with Cell C. Through its subsidiary The Prepaid Company (TPC) Blue Label increased its economic interest in Cell C to 63.19%. This involved swapping an additional 10% stake to settle Cell C’s obligations with Dark Fibre Africa (DFA) and committing R275 million towards debt repayment by 2026. The acquisition shows Blue Label’s long term confidence in Cell C’s turnaround and value.
- Strategic Investment: 63.19% stake in Cell C
- Debt Commitment: R275 million by 2026
- Equity-for-Debt Swap: Settled Cell C’s DFA obligations
Short-Term Headwinds vs. Strategic Execution
The interim results are mixed. Blue Label’s headline earnings were flat and group revenue down 4% for the half-year ended November 2024. The results were impacted by a decline in subscriber growth in Comm Equipment Company (CEC) and higher finance costs. EBITDA was down 6% but gross profit up slightly.
However Blue Label’s diversified revenue base is showing resilience. Revenue from products like prepaid electricity, ticketing and vouchers grew 8% offsetting the weakness in other areas. This diversification is key to reducing dependence on core mobile services and expanding into adjacent areas.
- Earnings Pressure: Flat headline EPS, 4% revenue decline
- EBITDA: Down 6%, Gross Profit up
- Diversified Revenue: 8% growth in non-core areas
Technical Analysis: Support Holding at R7.40
From a technical perspective Blue Label (JSE: BLU) is holding above the R7.40 support level supported by the 50-period EMA and an ascending trendline.
The recent pullback from R7.70 is in line with the descending resistance trendline that started in March.
MACD is flattening but not yet a reversal. A hold of the R7.40-R7.41 zone could trigger a rebound to R7.70. A break above R7.70 could go to R7.94 and R8.16.
- Entry: Buy on bullish reversal near R7.40
- Target: R7.70 (short-term), R7.94 (extended)
- Stop Loss: Below R7.10
Cell C Recovery Fuels Bullish Outlook
The bullish case for Blue Label is also supported by Cell C’s recovery. For the 6 months to November 2024 Cell C reported 13% revenue growth and 87% EBITDA growth. The capex light strategy and expansion of mobile virtual network operator (MVNO) services is driving profitability.
Blue Label’s increasing control over Cell C, financial restructuring and market diversification puts the company on a growth path. As the telecom industry in South Africa evolves Blue Label is well positioned to capture new market share and long term value.
- Cell C Growth: 13% revenue, 87% EBITDA surge
- Efficiency Play: Capex-light model
- MVNO Upside: Strong pipeline for new subscribers
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