Cell C has been in business distress for a number of years, but has a plan to help turn the company around.
The biggest obstacles have been brought about by own goals, namely a misguided business strategy, a recapitalisation in 2017 which burdened the business with unsustainable debt, poor decision making and bad governance, said chief executive officer, Douglas Craigie Stevenson.
“Our turnaround strategy is focused on ensuring operational efficiencies, restructuring our balance sheet, implementing a revised network strategy and improving our overall liquidity.”
Improving the company’s liquidity and debt profile requires a complicated and delicate restructuring. While a new recapitalisation is being negotiated, there is an informal debt standstill and debt payments have been suspended, he said.
He added that although Cell C’s lenders are entitled to call up the entire debt owed, they have not accelerated debt payments and have held off on taking enforcement action in order to facilitate a commercial solution.
“In addition to the restructuring of the debt there has been significant investor interest which validates that there is indeed value in the business,” said Craigie Stevenson.
“This value includes its nearly 16 million subscribers, a distribution network of over 240 stores countrywide, a strong brand that has been recognised as one of the top 30 valuable brands in the country as well as how the turnaround is taking shape from an operational perspective.”
Focus on operations
Stevenson said that Cell C has a ‘real opportunity’ to address its historical performance through a focus on operations.
He said that the company has taken active steps to reduce its focus on pure revenue and subscriber growth to focus on profitable, long-term growth.
- A cost-efficiency programme across all expense lines in the organisation – the run rate was over R864-million at the time of the interim results (September 2019), the additional savings will be reflected in the upcoming results;
- Rebalancing traffic and retail products – Cell C removed non-profitable products and increased its focus on retail product pricing and wholesale pricing;
- Shifting service revenue back to growth – this will be achieved through a more focused approach on profitable products and re-energising distribution channels;
- A new leadership team with the key appointments of a new CEO, CFO, Chief HR Officer and Chief Legal Officer;
- Appointment of non-executive, independent directors to the Board to bolster governance, improve diversity and transformation;
- A hiring freeze;
- Progress in stabilising labour relations.
“The company is in a far better shape operationally, and by fixing the base, the business can go on to build and innovate which will create additional value,” Craigie Stevenson said.
He added that Cell C is working on a revised network strategy.
“Networks will be a utility in the future with one or two mobile infrastructure providers per country and it does not make economic sense to overbuild on basic infrastructure.
“Against this background, in November 2019 Cell C negotiated an extended roaming agreement with MTN, which will enable the company to manage its network capacity requirements in a more scalable and cost-efficient manner. This will also provide access to current and future technologies.”
“There is (a_ belief in Cell C’s long-term prosperity and the new leadership team is focused on the journey to turn the company into a profitable, innovative player in the local telecoms industry and is confident the organisation is fully geared to overcome its challenges. Earnings are up, margins are stabilising and there is a ruthless approach to cutting additional costs out of the business.
“A recharged Cell C is being built that creates value for its stakeholders,” said Craigie Stevenson.