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South Africa's third-largest mobile network carrier Cell C has embarked on an extensive restructuring programme that includes the postponement of its debt payments and top guns to probe its books in order to contain a burgeoning debt.

Chief executive Craig Stevenson said in a widely publicised letter on Wednesday that the group was struggling to meet its debt obligations and had hired a leading law firm to investigate possible irregularities in its operations.

Stevenson said that Cell C had begun talks to delay the payment of its R8.9 billion debt - R2.6bn of which matures in August next year.

“We have implemented significant austerity measures and have cut costs which do not contribute to revenue generating activities, including a review of all contracts to ensure alignment with business priorities and a hiring freeze,” Stevenson said in the letter.

Cell C’s financial woes became apparent in March when the shareholders flagged deep troubles and said they were considering drastic measures to save the mobile operator.

Its biggest shareholder, Blue Label Telecoms - which holds a 45 percent stake after it recapitalised it with R5.5bn two years ago - yesterday plunged more than 11percent on the JSE on news of the restructuring

Blue Telecoms shares closed 9.74 percent lower on the JSE yesterday at R3.52.

In contrast, Cell C’s biggest rivals Vodacom and MTN fell slightly less than 1 percent by mid-afternoon.

Stevenson said Cell C had appointed PricewaterhouseCoopers to audit its procurement practices and review processes, and law firm Bowmans to investigate any irregular business practices.

Cell C said Deloitte would be an independent financial restructuring adviser.

An analyst who preferred not to be named, said Cell C’s strategy had been misaligned from the onset.

The analyst said the group had not provided adequate network coverage for its customers and had failed to add value to its clients.

He said Cell C needed to have drastically changed strategy when it was recapitalised by Blue Label, but did not do so, and so the recapitalisation had failed.

Last month Standard & Poor’s (S&P) downgraded Cell C’s debt rating further after the group renegotiated terms of its R1.4bn debt.

The ratings agency said at the time while no conventional payment or legal default event had occurred, it viewed the repayment profile restructuring as a distressed exchange.

It was the second time in three months that the under-pressure operator had been downgraded by S&P for its debt profile.

“I was appointed in March 2019 as the interim chief executive with the clear mandate from the Cell C board to right-size and optimise the business. There was an acknowledgement that the company faces, and continues to face, financial and other challenges,” Stevenson wrote.

Cell C has 17.2 million subscribers, while competitor MTN has some 27 million subscribers locally.

Nicholas Kunze, a money manager at Sanlam Private Wealth, told Bloomberg news service: “The market is just not prepared to hold stocks in companies with excessive debt loads anymore. Look at Tongaat, Omnia all with big debt piles, and all getting hammered.”

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