Independent auditor's report


We have audited the Consolidated Financial Statements of Blue Label Telecoms Limited (the Group) set out, which comprise the Consolidated Statement of Financial Position as at 31 May 2023, and the Consolidated Statement of Profit or Loss and Other Comprehensive Income, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year then ended, and notes to the Consolidated Financial Statements, including a summary of significant accounting policies.

In our opinion, the Consolidated Financial Statements present fairly, in all material respects, the Consolidated Financial Position of Blue Label Telecoms Limited as at 31 May 2023, and its Consolidated financial performance and Consolidated Cash Flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.


We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group and company in accordance with the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of Financial Statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.


Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Consolidated Financial Statements of the current period. These matters were addressed in the context of our audit of the Consolidated Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matters in the current year include:

Key audit matter How our audit addressed the key audit matter
Going Concern and Valuation of Cell C  
The Group’s investment in Cell C is assessed at each reporting period and when there is an indication that the investment may be impaired. The Group should also assess at each reporting period whether the impairment loss recognised in previous reporting periods can be reversed.

If an indication of possible reversal is identified, management must estimate the recoverable amount of that asset. Evidence was available during the reporting period, from internal reporting sources, which indicated the economic performance of its investment is, or will be, better than expected. The Group has performed a Value In Use Calculation at that point to determine whether the previously recognised impairment should be reversed. Based on the results of the valuation, which was performed by management’s expert, a reversal of impairment of Cell C amounting to R962 million was recognised as well as the recognition of losses in Cell C to the value of R1.3 billion. At year end, no further indicators were present, which was not already taken into account, and the Value In Use Calculation, as well as the significant inputs were stress-tested. No further adjustment was required at the reporting date.
The Value in Use calculation performed by management during the reporting period was assessed and reperformed and no material differences relating to the valuation has been identified. The reversal of impairment was recalculated by the audit team using the valuation and the historical impairment schedule. We also reviewed the significant inputs used by management, which included the growth rates, including the discrete growth rate assumptions to extrapolate cash flows, and the pre-tax discount rate used. We also reviewed the relevant assumptions applied in determining the Value In Use of the investment. It’s an overarching principle of the Value In Use estimate that assumptions should be reasonable and supportable and in this respect, we carefully considered the risk factors present in the Group’s holding of the investment in Cell C. In particular IAS 36 requires the valuation to incorporate expectations around possible variations in the timing or amount of the cash flows and the price of bearing the uncertainty inherent in the investment. We assessed the distress overlay, amongst other inputs, applied by management in the Value In Use calculation and the relevant assumptions taken into account. We deemed the inputs and assumptions appropriate for the purposes of the valuation performed. At the reporting date, we assessed whether there were any additional indicators present which could indicate that the impairment loss reversal should be adjusted. In addition, we recalculated the stress tests performed by management, and considered whether the stress test were sufficiently robust. The Value In Use calculated during the period, when the indicators were present where found to be appropriate and no further adjustment required.

The share of losses relating to the investment in Cell C were recalculated and no material differences were identified.
Post-Paid Contract Device Arrangement  
CEC amended the terms of its revenue and subscription income agreement with Cell C as it relates to the sale of contract devices to subscribers as customers of BLT.

The contract was amended to allow the Group to control the stock and the risks related to stock holding up to the point of sale to the customer. The change in the agreement resulted in the Group controlling the inventory in the Cell C warehouse. Consequently, the subsidies on the handsets are now considered an incremental cost in obtaining a contract with the customer and have been recognised and included in advances to customers.
The accounting treatment relating to the Post-Paid Contract Device Arrangement was assessed with the assistance of technical reporting specialists, in accordance with the requirements of IFRS 15 and established industry practice. We specifically focused on the transfer of control of devices to CEC and the delivery of those devices to customers by considering both the amended contractual arrangement in place, and the practical changes made by both parties to transfer such control to CEC. The revenue recognition of the handset sales where CEC now acts as a principal has been assessed and is in line with the requirements of IFRS 15 in determining whether the Group controls the device before it is transferred to a customer and whether the Group is primarily responsible for fulfilling the promise to provide the devices to the post paid customer base. A stock count has been performed to confirm the existence of the inventory at the reporting date.

The recognition of the subsidy of handset sales to customers has been assessed as appropriate, the classification of the asset as a receivable, included in advances to customers (cross refer) is also considered appropriate as the costs will be primarily recovered from the post paid base, and appropriately reflects the substance of the amended contractual arrangement entered into between Cell C and CEC.
Key audit matter How our audit addressed the key audit matter
Recapitalisation of Cell C  
During the current year, the Group concluded a robust recapitalisation process with Cell C and various financiers to deleverage the Statement of Financial Position and ensure the continued liquidity and success of Cell C. The transactions involved, amongst others, transactions within the Group with Blue Label Telecoms Limited, The Prepaid Company and Comm Equipment Company. The provisions of the agreements relating to the recapitalisation are complex and included in detail in the financial statements (note 2.1.1). As a result of the restructure and various transactions with Group entities and shareholders with Cell C, the Group’s total shareholding is 63.19%, of which 13.66% is non-participatory. The accounting treatment and relating presentation and disclosure of the recapitalisation transactions have been assessed with the support of technical reporting specialists. We reviewed the position papers prepared by management as well as the term sheets and agreements entered into as it pertains to the Group. Open and robust discussions with management were held where the positions taken by management were challenged. After lengthy discussions were held with both management of the Group and management of Cell C, and through applying professional judgement, the positions taken by management were accepted without material deviation. The presentation and disclosure of the transactions in the AFS were carefully considered so as to ensure the information is appropriately presented and complete, specifically as it relates to significant judgements made in applying the standards and the accounting policies of the Group.

With assistance from tax specialists, the tax treatment of these transactions were assessed. The tax positions of the Group were considered and after lengthy discussions, the positions were accepted with no material deviations. The valuations as performed by management’s valuation experts relating to the agreement on its inception date has been assessed with assistance from valuation specialists and no material differences have been identified.

The increase in the percentage shareholding in Cell C to 63.19% was carefully considered to determine whether The Prepaid Company controls Cell C after concluding the recapitalisation. We specifically considered whether TPC has power of the investee by considering the board representation, and all relevant facts and circumstances which could give TPC the practical ability to exercise power over Cell C. It was concluded that Cell C remains an associate for the reporting period as the criteria for control as per IFRS10.7 was not met. We will continually assess the relationship between TPC, the Group and Cell C.



The consolidated financial statements of Blue Label Telecoms Limited for the year ended 31 May 2022 were audited by PricewaterhouseCoopers Inc. who expressed a modified opinion on those statements on 25 August 2022.


The directors are responsible for the other information. The other information comprises the information included in the document titled “Blue Label Group Annual Financial Statements 2023”, and in the document titled “Blue Label Telecoms Limited Annual Financial Statements 2023”, which includes the Directors’ Report, the Report of the Audit and Risk Committee and the Certificate by the Company Secretary, as required by the Companies Act of South Africa, which we obtained prior to the date of this auditor’s report and the other sections of the document titled “Blue Label Telecoms Integrated Annual Report 2023”, which is expected to be made available to us after that date. The other information further comprises the Shareholder Analysis on Annexure A: shareholder analysis. The other information does not include the consolidated financial statements and our audit report thereon.

Our opinion on the Consolidated Financial Statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the Consolidated Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Consolidated Financial Statements, or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.


The directors are responsible for the preparation and fair presentation of the Consolidated Financial Statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of Consolidated Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Consolidated Financial Statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.


Our objectives are to obtain reasonable assurance about whether the Consolidated Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Consolidated Financial Statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the Consolidated Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
  • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Consolidated Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the Consolidated Financial Statements, including the disclosures, and whether the Consolidated Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
  • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, amongst other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the Consolidated Financial Statements of the current period and are therefore the Key Audit Matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.


In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that SizweNtsalubaGobodo Grant Thornton Inc. has been the auditor of Blue Label Telecoms Limited for one year.

Alex Philippou

SizweNtsalubaGobodo Grant Thornton Inc.

Engagement Director

Registered Auditor

29 August 2023

221 Garstfontein Road