When will Cell C be profitable?

Despite having opened its doors more than 12 years ago, South Africa’s third mobile operator, Cell C, is still some way off achieving profitability.

Speaking at the company’s headquarters in Midrand on Tuesday (13 May 2014), new CEO Jose Dos Santos outlined the company’s growth over the past year, with total revenue up 14% year on year, and subscribers up 35% YoY to the end of December, 2013.

“I can say that our ebitda (earnings before interest, taxes, depreciation, and amortisation) growth has been good, and that our ebitda is positive…quite extensively,” Dos Santos said.

“It is positive and growing,” Robert Pasley, Cell C CFO added of the group’s pre tax earnings.

BusinessTech asked when Cell C might start to turn a profit, Dos Santos said: “That’s for management and shareholders…we debate that…we don’t want to comment. We have a strategy in place; we are in line with it.”

“We did say that we wanted to have 20-25% revenue share within the next five years, one year has gone…we are tracking that.”

Paisley said that the company’s revenue share was at close to 12%.

In July 2013, former CEO, Alan Knott-Craig said that Cell C was on a three year path to profitability, pointing out that operators in SA needed a market share of between 20-25% to achieve that.

On Tuesday, Dos Santos said that it signed up a record 1.6 million new subscribers in March 2014, taking its total subscriber base to 16.6 million.

This compares to approximately 31 million Vodacom subscribers in SA, while MTN recently announced a drop of 825,000 subscribers to 24.9 million in the country.

Dos Santos noted that in 2013, Cell C received equity injections of R2.6 billion, while an additional R1.5 billion has been injected so far in 2014.

“The shareholders remain very supportive of Cell C,” he said.

The company also pointed to R1.8 billion local debt and $120 million foreign debt raised during 2013, “to augment equity injections and support business expansion and capital investment”.

A further US$125 million foreign currency deal is near completion and is expected to increase to $200 million by year-end, Dos Santos said.

“We continue to enjoy a very strong relationship with our local and international lenders including Nedbank, DBSA, CDB and others,” he said.

Dos Santos said that the group’s capex forecast for 2014 is at R2.3 billion in 2014.

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When will Cell C be profitable?