Last year Cell C had an impairment of R5bn, as the company evolved to become a buyer of infrastructure services and decommissions its own physical infrastructure by 2023. Photo: Simphiwe Mbokazi.
Last year Cell C had an impairment of R5bn, as the company evolved to become a buyer of infrastructure services and decommissions its own physical infrastructure by 2023. Photo: Simphiwe Mbokazi.

Cell C returns to profitability as new business model pays off

By Dineo Faku Time of article published Oct 28, 2021

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CELL C, South Africa’s fourth biggest telecommunication company, yesterday said it had grown subscribers and returned to profitability during the half year ended June 2021 with a R148 million profit before tax marking a turnaround from the R7.6bn loss reported year-on-year.

Chief executive Douglas Craigie Stevenson said the group’s financial performance had improved and it was making good progress on the three-year transition to a virtual RAN (Radio Access Network), the implementation of its new business model and the introduction of new products to market.

He said Cell C had successfully migrated 40 percent of the network, with access to 7 500 towers of which 95 percent were 4G/LTE enabled.

He said Eastern Cape, Free State, Northern Cape and Limpopo had been fully migrated.

“We will continue to add new sites which will reduce our network deficit. In two years, we will have access to more than 12 500 sites across the country improving the quality and coverage of our network,” he said.

Stevenson said this had enabled the group to get back into the broadband market, reconsider the mix of products it offered and sustained its average revenue per user (ARPU) at R66 year-on-year, while growing the prepaid customer base by 15 percent to 9.6 million up from 8.4 million in the first half of last year.

Cell C said ARPU was sustained due to the operator’s strategy of focusing on more profitable customers.

The group said the total subscriber base had grown close to 13 million up from 11.7 million in the same period last year. Total revenue for the six-month period was down by 5 percent to R6.6bn, with the largest part of the revenue contribution from Cell C’s prepaid base at R3bn and a reduction in its postpaid base by 25 percent to R563m.

Earnings before interest and taxation increased to R736m from a R5.3bn loss mainly due to the significant impairment of network assets in the previous financial year and operational expenditure savings in this reporting period.

Last year Cell C had an impairment of R5bn, as the company evolved to become a buyer of infrastructure services and decommissions its own physical infrastructure by 2023.

The group also unveiled plans to invest R1bn of capex a year as part transitioning into a technology company.

Zaf Mohamed, the chief financial officer of Cell C, said Cell C would need more than R5bn capex annually to build a comparable network, this would also take several years to implement, and instead, the group was deploying an asset-light infrastructure model and planned to invest capex of R1bn a year.

“Our three most valuable assets that are not on our balance sheet and underpin our transformation journey are spectrum, a loyal and profitable customer base and a resilient brand. Together with our network strategy, consumer-driven digital products and solutions, as well as our focus on a high-performance culture, we have a sound platform from which to compete and assist us to deliver on our strategic intent,” Mahomed added.

Mohamed said the capex included technologies to support the platform model it was implementing.

As part of the transition Cell C has among others shut down radio networks and moved all prepaid customers onto the MTN network and in terms of postpaid subscribers the company has also reached a new agreement with Vodacom to expand its nationwide roaming agreement for 2G, 3G and 4G connectivity.

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BUSINESS REPORT ONLINE

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