09/05/05. Innercity building with Cell C logo.
09/05/05. Innercity building with Cell C logo.

Cell C's net loss widens to R7.5 billion

By Dineo Faku Time of article published Oct 21, 2020

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JOHANNESBURG - Cell C said yesterday that its net loss after tax had widened to R7.5 billion mainly as a result of one-off costs and adjustments.

The telecoms operator said the net loss after-tax had widened in June from an R875 million loss last year and had included the impairment of R5bn worth of assets due to the new MTN network arrangement.

Cell C also said it had incurred once-off recapitalisation and restructuring costs and that reported earnings before interest, taxes, depreciation and amortisation was lower at R1.2bn from R1.4bn in 2019.

Chief financial officer Zaf Mahomed said the group remained focused on restructuring the balance sheet and optimising the business for long-term competitiveness.

“We have a legacy debt challenge in our balance sheet, rather than an income statement, one which will be addressed with the recapitalisation,” Mahomed said.

Cell C said overall revenue was at R6.9bn compared to R7.4bn in the six months of the previous year.

A total of 89 percent of Cell C’s revenue was from service revenue which was 6 percent lower at R6.5bn, while hybrid and Fibre-to-Home saw an increase in sales of 16.7percent and 11.1percent, respectively.

The group said it had lost 35 percent at 8.3 million prepaid customers at the end of June, 4.4 million fewer customers than 12.78 million prepaid customers in June last year.

Cell C said this translated into only a 9.9percent decrease in pre- paid revenue, while gross margin grew by 11.5 percent and prepaid average revenue per user increased by 26.9percent.

Chief executive Douglas Craigie Stevenson said the decline in prepaid subscribers was in line with the management’s strategy to focus on profitable subscribers rather than the subscriber base.

“I have maintained that if I wanted to increase the subscribers it would not be difficult to put out a reckless deal into the market that would be able to bring on subscribers.

“I think it is more important than ever that Cell C in this current period up until the recapitalisation is finalised is careful and conscious of the types of deals it puts out to customers so that we put deals that make sense to everyone,” said Craigie Stevenson.

Last month Telkom said it had overtaken Cell C as South Africa’s third-biggest mobile operator due to a surge in data traffic during the lockdown.

Cell C, which is 45 percent owned by Blue Label, embarked on a recapitalisation process to address its R9.7bn mountain of debt.

Mahomed said the group hoped the recapitalisation would lower the cost of funding.

“Our cost of funding remains high. Given the situation our business finds itself in the cost of funding is a key issue. Hopefully through the recap will have access to lower funding,” he said.

Mohamed said some of the biggest highlights for the six months were the 13 percent decline in direct expenses, and the halving of capex to R109m helping the business to preserve liquidity.

In August Cell C announced plans to close 128 stores and retrench 546 employees, saying the retail environment had changed and this had been fast-tracked by the impact of the Covid-19 pandemic and the evolving purchasing habits of consumers.

The group said its Section 189 process had been expanded to include the retail footprint.


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