Saudi Telecom takes big hit on Cell C spend
Saudi Telecom Company (STC), which indirectly owns a significant stake in Cell C, has reported a 79% drop in fourth quarter profits, citing rising costs and one-off charges at its Indian and South African affiliates.
In 2008, STC invested $2.6 billion in a 35% stake in Oger Telecom, the Lebanese-controlled firm which has an indirect 75% holding in Cell C.
CellSAF, a BEE consortium of companies holds the remaining 25% in SA’s third mobile operator.
On Monday (21 January) STC revealed net income in the three months ending December 2012, of SR468 million (R1.099 billion), down from SR2.28 billion (R5.358 billion) a year earlier.
And for the year, net income amounted to SR7.35 billion (R17.272 billion) compared to SR7.73 billion (R18.165 billion) for the corresponding period last year – a decrease of 4.9%.
STC attributed the decrease in net income over both periods to two main reasons including the re-evaluation of its investments fair value in in Cell C (South Africa) and Aircel (India) during the fourth quarter, which resulted in recognising a one-time, non-recurring and non-cash charge of SR641 million (R1.506 billion) provisions from impairment of intangible assets.
It also noted a change in telecom regulations in India, which led to a deferred taxes charge related to its Aircel operations.
Khaled A. Alghoneim, CEO of Saudi Telecom Group said: “The financial results for the period ending 31 December 2012 – despite the provisions resulting from the impairment of intangible assets & deferred taxes booked during the fourth quarter – provides a solid base for the next phase of STC’s growth. This will be underpinned by the new programme which was launched recently.”
He said that the programme focuses on driving efficiencies and optimising operational performance across the group.
With regards to international operations, STC group said that during 2012, it witnessed revenue growth of 40% in the controlled subsidiaries compared to 2011, driven by continued subscriber additions in post-paid, pre-paid and wireless broadband.
“However, our investments in Aircel, Cell C and Axis, were not performing up to expectations and we intend to employ continued focus to enhance the performance of these companies,” it said.
Cell C revival
Cell C appointed Alan Knott-Craig Snr as the new CEO in January 2012 and has since launched a numerous data and voice deals to shake up the market and steal market share from rival operators, Vodacom and MTN.
In December, the group also announced the launch of its Long Term Evolution (LTE) data trial, following commercial launches by Vodacom, MTN and a trial by 8ta.
Cell C said it aimed to have over 60 sites before the end of the year, adding that more would follow in 2013.
The group passed 10 million customers in 2012, a long way behind MTN SA with approximately 24.5 million, and Vodacom at more than 30 million.
Cell C results
Cell C told BusinessTech in October that it was unlikely to publish its results for the 12 months to the end of December 2011. “Announcing high level annual results is usually at the discretion of the CEO,” a spokesperson said.
For the 12 month period to the end of December 2010, Cell C had R7.5 billion in long-term debt and an additional R500 million in current liabilities.
Revenue improved to R10.2 billion while earnings before interest, tax, depreciation and amortisation stood at R1.4 billion.
1 Saudi Riyal (SR) equals 2.35 South African Rand (R)
More on Cell C
Investors knocking on Cell C’s door
Cell C LTE trial details emerge
Loading ...