Cell C's full financial results, for the six months ended June 2016, provide detailed insight into the performance of South Africa's third-largest mobile telecommunications operator for the first time. The numbers are contained in a circular published this week by JSE-listed Blue Label Telecoms, which is acquiring a 45% stake in Cell C for R5.5-billion. They show that Cell C is profitable - just - for the first time since it was launched 15 years ago. But they also paint a picture of a business lumbered by debt and struggling to make headway against its bigger rivals.Cell C has racked up accumulated losses of R26.4-billion to date. Furthermore, it has debts totalling R29.6-billion, of which R19.2-billion is in the form of interest-bearing loans and borrowings. Net debt at the end of 2015 was a staggering R20-billion, up sharply from R14.3-billion in 2014.The proposed restructuring, in which staff and management will take 25% of the operator's equity, will see debt levels reduced to a "manageable" R8-billion.story_article_left1Cell C's liabilities exceeded its assets by R12.2-billion as at end-June 2016. But, it said, "funds will be available to finance future operations" and the "realisation of assets and settlement of liabilities will occur in the ordinary course of business". In other words, management doesn't believe it's going to sink under the weight of debt.The debt levels have not deterred investors in Blue Label, who have pushed its share price up sharply. Since the transaction was announced in December last year - at the time, the plan was to acquire 35% of CellC for R4.5-billion - the share has more than doubled. It closed on Wednesday at R21.50, up almost 90% year on year and giving the company a market value of R14.4-billion.The deal, analysts say, gives investors another avenue - other than Vodacom, MTN and Telkom - to invest in South Africa's telecoms industry.Analysts point out that Vodacom is a well-run company, but growth is slowing, while MTN has faced significant challenges in the past year, not least the (reduced) R14.4-billion fine imposed on it by Nigerian authorities.MTN is facing other challenges in the West African country, its largest by customer numbers and profitability, that make it a less attractive investment.Institutional investors across the board have been burnt by the collapse in MTN's share price, which this week flirted with its lowest levels since 2010 after lawmakers in Nigeria stepped up a probe into what they allege is the illegal movement of billions of dollars out of the country.Blue Label could provide an alternative to investors who have grown wary of MTN's prospects.But there are worries too. For one thing, at face value there appeared to be a risk that Blue Label could lose its "lucrative" prepaid airtime distribution agreements with Vodacom and MTN, said an equities analyst who asked not to be named.Blue Label is the biggest distributor of prepaid airtime in South Africa. It has historically had a strong relationship with Vodacom, but became close to CellC after 2012 when former Vodacom CEO Alan Knott-Craig took the reins. The good relations continued under current CEO Jose Dos Santos."The part I find difficult to get my head around is, in the longer term there's an inherent conflict in Blue Label having a shareholding in Cell C and continuing to do business for Cell C's competitors," said the analyst.story_article_right2"I'm not saying I know the intricacies of those contracts, but what happens now? What is Blue Label's longer-term intention? Will it focus more on Cell C or on being a distributor for the mobile operators? This needs to be understood more carefully."The Cell C numbers published this week make for fascinating reading. They show not only that the operator turned a tiny profit in the period of R2.8-million on revenue of R7-billion - a margin of 0.04% - but that its swing to profitability has come about rapidly.In the same period in 2015, it turned in a loss of almost R1.2-billion. Operational profitability, measured using earnings before interest, tax, depreciation and amortisation, has also improved markedly - in the financial year ended December 2015, ebitda was R1.9-billion, up from R424-million in the previous year.A key question is whether the swing to profit at Cell C is sustainable in a market where the operator has no choice but to continue investing heavily in network infrastructure.Vodacom and MTN are together spending more than R20-billion on their networks this year. Investments are likely to stay high as operators are forced to make their networks denser (by building more base stations) in the absence of new spectrum...