Cell C wants to shift into a ‘digital lifestyle company’ – with product offerings and partnerships in the pipeline

 ·29 Sep 2022

Mobile operator Cell C on Thursday (29 September), published a market update on its future post-recapitalisation, “as a fit-for-purpose entity”.

The embattled company said it aims to develop into a ‘digital lifestyle company’ with new customer propositions and platform solutions. A number of these initiatives are set to be delivered in the next few months, it said.

It also provided an update on its scalable and cost-efficient network strategy, which commenced in 2021, “and is on track to be concluded by the end of 2023”. It also shared with the market its approach to new customer propositions and platform solutions post the recapitalisation process.

Cell C said its recapitalisation, which was concluded earlier in the month, de-leveraged its balance sheet and improved its overall liquidity position.

Cell C CEO, Douglas Craigie Stevenson, said the focus over the past three years has been on implementing a turnaround strategy, introducing a new business model and managing the transition of its network.

“This is the backdrop of our drive to lay a firm financial foundation while simultaneously implementing significant operational changes,” he said.

Cell C delivered on revenue & customer base

The group said it has managed to maintain a stable customer base over the past 18 months despite tough market and trading conditions.

Economic conditions such as the impact of Covid-19 and the resultant economic slowdown, exacerbated by the persistent load shedding, impacted consumer and business confidence and ultimately consumer spending over the past 18 months.

The above factors translated into a decline in the revenue through churn, lower gross additions, lower Average Spend Per User and higher discounts provided to attract the desired customer base. In addition, the delays of the complex recap process and the difficult adjustment period for Cell C, have to be considered when reviewing the company’s performance.

Despite these challenges, total revenue was stable for the first six months to June 2022 at R6.51 billion (H1 2021: R6.59 billion). When comparing revenue for the 12 months from January to December 2021 to the prior year, there was a 5% decline to R13.4-billion (FY 2020: R14.13 billion).

The bulk of revenue continues to come from the prepaid segment including prepaid broadband, which during H1 2022 contributed about 45% to total revenue at R2.96 billion (H1 2021: R3.03 billion), it said.

For 2021, revenue from its prepaid customer base, including prepaid broadband, contributed 47% to total revenue at R6.27 billion (FY 2020: R6.22 billion).

Overall ARPU for H1 2022 was 2.6% higher at R80.11 (H1 2021: R78.07), and for the full year up to December 2021, overall ARPU was stable at R81.69 (FY 2020: R81.09).

Impact on EBITDA

During H1 2022, direct expenditure was at R4.7 billion, which is 29% higher than the same period in 2021. This is mainly as a result of liquidity support and roaming costs, offset by some operational cost savings, the operator said.

Direct expenditure for the full year 2021 was at R7.6 billion (FY 2020: R7.2 billion), 6% up on last year, while gross margin was lower at R5.74 billion (FY 2020: R6.91 billion). Recapitalisation costs continued to negatively impact EBITDA in both reporting periods.

EBIT for H1 2022 amounted to a loss of R1.09 billion (H1 2021: R667 million profit) mainly as a result of impairments during the first half of 2022, and as a result of audit adjustments and the business transition into the new operating model, the group said.

Lerato Pule, the new chief financial officer of Cell C, said the interest charges and forex losses which have burdened Cell C over the past few years will be significantly lower post recapitalisation, as the foreign debt will be reduced to nil and the once-off costs associated with the recap will be taken in full in the 2022 financial year.

“We are almost there – over the past 18 months, we have actively focused on optimising our network operating expenses, finance leases, capex spend and roaming costs. We will be reinvesting in our billing and network systems. Our capex-light infrastructure model will ensure a sustained liquidity position for the business.”

Network migration 61% completed 

Through its network strategy,  Cell C has significantly increased its network footprint in the last 18 months. As at end of September 2022, it had access to 9,131 sites, up from 3,000 sites, with over 96.5% LTE enabled.

Six provinces have been 100% migrated, and all that remains is the Western Cape, Kwa-Zulu Natal and Gauteng, which are at 88%, 57% and 33%, respectively, it said.

“We are systematically increasing our capacity, and soon we will have 14, 000 sites, enabling us to compete with the largest operators in the market,” Pule said.

Going forward                                                                                                                  

“With a deleveraged balance sheet, a capex light model, our solid spectrum, a loyal and profitable customer base and a resilient brand to underpin our transformation journey, Cell C is well placed for the future,” said Craigie Stevenson.

“We are now focused on the post-recapitalisation period with Cell C as a sustainable business and a clear business strategy.”

“In this next phase of growth, we have a number of new product offerings and partnerships in the pipeline, Capitec being the first one announced earlier this week. We are geared and ready to be an agile player in the evolving telco landscape,” the chief executive said.

Read: Blue Label completes recapitalisation of Cell C

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