Is Cell C making money?

It’s been nearly six months since an analyst criticized Cell C for decimating its own business case which, he said, would ultimately lead to its demise in 2014.

Paul Theron, CEO of Vestact Limited said in August last year that Cell C is “basically burning the furniture over there to stay in business,” and had to raise more money to stay afloat.

The analyst said that the company was hurting the mobile market in South Africa for everyone, including itself, with its aggressive pricing strategy.

“Cell C will be dead within six months. Listen to me now – they are under such pressure that they basically decimated their own business chasing market share,” he said.

Cell C is not obliged to provide its financial details, as it is not a public company, and has not done so since CEO, Alan Knott-Craig took the reins in January 2012.

Knott-Craig is currently recovering from a stroke he suffered late in 2013.

Business Tech has on several occasions, over the past several months, questioned Cell C on its financial state.

In its most recent reply, acting CEO at Cell C, Jose Dos Santos, said: “Cell C is alive and well. We are growing at an acceptable rate and will inform you of our performance in due course. We cannot comment on specific financial information as a private company.”

Alan Knott-Craig
Alan Knott-Craig

In 2013, group received an injection of R5.7 billion from Oger Telecom, the Lebanese-controlled firm with an indirect 75% holding in the SA operator, which invested a further $350-million (around R3.5 billion) and key lenders “including Nedbank and the Development Bank of South Africa” which provided R2.2 billion.

However, at the time and long after, Knott-Craig stressed that if the regulatory framework in SA is not conducive to investment, his backers wouldn’t invest in the group.

The bulk of that funding was set to go towards the operator’s network which has come under strain amid rising subscriber numbers and increased data traffic.

In July, Knott-Craig said that Cell C is on a three year path to profitability, pointing out that operators in SA needed a market share of between 20-25% to be profitable.

In November, the operator announced that it had hit 13 million subscribers for the first time, taking its share towards 20%, up from approximately 11.7 million in July and a market share of 17%.

Icasa call rate cut

On Wednesday (29 January), the Independent Communications Authority of South Africa (Icasa) announced new call termination rates (CTRs).

CTRs refer to the fee that one network charges another for receiving and terminating calls on its network.

According to the new regulations, the rate will drop to R0.20 from 1 March 2014, with a further drop to R0.15 in 2015, and R0.10 the following year. This is the rate, per minute, the smaller operators will pay MTN and Vodacom to carry calls.

Vodacom and MTN, meanwhile, will pay R.044 to carry calls from operators including Telkom Mobile and Cell C.

“This comes as a relief to Cell C as we have over the last 18 months committed ourselves to leading price competition even at the expense of our own margins, while motivating to Icasa for pro-competitive relief,” said Cell C acting CEO, Jose Dos Santos.

“Without this intervention it was likely that the South African market would have continued to have been an effective duopoly to the detriment of the consumer, industry and the South African economy. With the support of this regulation, the mobile market will continue to become more competitive on a sustainable basis.”

The operator said that by increasing its share of the market and putting further pressure on the dominant competitors, it is confident it can drive access to more affordable communications for all South Africans, even those not on its network.

“Icasa has made a decisive and positive move in publishing these regulations, which we believe is another critical step in levelling the SA telecoms market,” Dos Santos said.

More on Cell C

Cell C’s Knott-Craig warns backers may stop investing

Cell C dead by 2014: analyst

Cell C exceeds site roll-out target

Cell C accelerates subscriber growth

Cell C seeks profitability within 3 years

Cell C: where the billions will go

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Is Cell C making money?