Cell C gets R3.5 billion cash boost
Mobile operator Cell C has announced two significant inflows of long-term capital, including an initial equity investment of $350 million which it says will enable the company to continue offering “competitive and innovative products and services” and ultimately lower the cost to communicate in South Africa.
The company says it now also has over 11.5 million customers.
Having surpassed 10 million customers in the second half of 2012, Cell C CEO, Alan Knott-Craig has expressed his desire to attain a quarter of South Africa’s mobile market share within four years, from approximately 13%.
Questions have been raised about the quality of Cell C’s network with subscribers citing poor connectivity on the cellular network.
According to Cell C, Oger Telecom, the Lebanese-controlled firm which has an indirect 75% holding in the SA operator, has earmarked an equity investment of $350 million (about R3.5 billion at the current exchange rates) into Cell C.
The injection follows the Independent Communications Authority of SA’s announcement in June to conduct a market review of the remedies under the Call Termination Regulations and other programmes aimed at addressing the high cost to communicate in South Africa, Cell C said.
The cash boost, according to Cell C, “will unlock the potential of the business and lead to lower prices for consumers”.
The equity investment of $350 million for 2013 is in addition to the $200 million equity invested in 2012 and a further significant investment scheduled for 2014, the group added.
Cell C Alan Knott Craig Senior
“Under the leadership of Alan Knott-Craig, Cell C has gone from strength to strength. The company has a solid business strategy and we are confident that the Regulator will make decisions that give smaller players a better chance of being sustainable competitors. It is on this basis that we as shareholders are fully committed to the company and the country,” said Mohammed Hariri, chairman of both Cell C and Oger Telecom.
“Icasa’s decision to conduct a market review of the remedies under the Call Termination Regulations has bolstered our shareholders’ confidence in the future of Cell C and the industry,” said Cell C CEO, Alan Knott-Craig.
“The equity injection also strengthens our balance sheet. But Cell C needs aggressive and proactive regulatory support to continue its drive to reduce the cost to communicate in South Africa and remain sustainable in the process.”
Cell C said that Icasa’s review of Call Termination Regulations in South Africa is a positive move by the regulator.
The operator pointed to a number of possible remedies, “of which the most important are aggressive and sustained asymmetry, mandatory flat rates and lower mobile termination rates for operators with significant market power”.
“With this financial injection and a regulatory outcome that promotes sustainable competition for smaller players, Cell C will lead the way in lowering the cost to communicate and further expand its network coverage,” said Knott-Craig.
In addition to the shareholder injection, key lenders – including Nedbank and DBSA – have just concluded a long-term financing package of R2,2 billion to Cell C, in a transaction arranged by Nedbank, the operator said.
“Nedbank has again shown its support for Cell C and we thank the institution for working on this package for us. The financing package also carries partial guarantees from Oger Telecom, in a further indication of its support,” says Knott-Craig.
The combined funding, of equity and loans, will provide the company with a sizeable pool of liquidity to continue investing in its network quality, customer base and product offerings.
In addition, the funding structure ensures the company maintains an appropriate capital structure and balance sheet to sustain its drive to offer compelling tariffs and services to its customers.
“Our shareholders have indicated a willingness to inject further equity in 2014, if, as anticipated, the review by the Regulator facilitates a more competitive industry where smaller players like Cell C can remain sustainable,” said Knott-Craig.
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