Cell C slashes its full-year operating loss

By Dineo Faku Time of article published Mar 24, 2020

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JOHANNESBURG - Cell C, South Africa’s third-biggest mobile operator said yesterday that it was no longer pursuing customers at all costs as it slashed its full year’s operating loss during the year that ended in December 2019 to R3.94billion from R7.36bn in 2018.

The group, which is 45 percent owned by JSE listed Blue Label Telecoms, reported a 21 percent decline in prepaid customers to 2.9 million in 2019.

It said that the margin on existing customers was better as a result of acquiring profitable customers.

Chief financial officer Zaf Mohamed said customers had been reduced as a result of the group’s move to actively managing its customers by pursuing more profitable customers.

“We are connecting better customers and focusing on profitable subscribers. We are not chasing subscriber growth as a cosmetic indicator,” Mohamed said, adding that the company had removed non-profitable products and increased its focus on retail product pricing.

Group revenue declined marginally 1percent to R15.2bn from R15.67bn a year earlier, while earnings before interest, tax, depreciation and amortisation, jumped by 136 percent to R1.7bn during the last six months, compared to R734.6m in the first half of 2019.

“This is a turnaround of almost R1-billion which is very encouraging, bearing in mind we continue to operate in a tough economic environment with increased market competition and cash flow constraints,” Mohamed said.

Cell C moved to review its operating model and organisational structure, specifically at a senior manager and executive levels management in a bid to revive the business.

Mohamed said that the review highlighted a number of inefficiencies that were contributing to the operating and financial challenges the company currently faces.

“Consultations are expected to be concluded by the end of April 2020,” said Mohamed.

Cell C introduced a turnaround strategy last March, focused on operational efficiencies.

Chief executive Douglas Craigie Stevenson said that the green shoots of the strategy were now visible.

Craigie Stevenson said Cell C was now an operationally sound business that was financially viable and competitive.

“The business performance allows for a successful recapitalisation to take place with a sustainable debt profile,” Craigie Stevenson said.

“We are optimistic that the hard work of fixing the operations prepares us to conclude the recapitalisation and to continue to be a customer champion delivering innovative service offerings.”

Craigie Stevenson said the results were based on the group’s old model.

“We are confident that a new way of business based on the extended roaming agreement with MTN will lead to even greater strategic clarity and operating momentum,” he said.

Peter Takaendesa, the head of equities Mergence Investment Managers said Cell C had demonstrated signs of improvement in operational performance in the second half, but it remained difficult to assess how sustainable this performance would be if they continued to experience liquidity challenges while economic conditions remain very difficult in South Africa.

“Unfortunately Cell C will no longer be in a position to play the traffic and subscriber game that it has followed in the past as these would not add any value to its stakeholders under the new roaming agreement,” said Takaendesa.

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