Cell C sees a profit – but there’s still trouble

 ·27 Nov 2023

Despite recording a profit in 2022, Cell C says it’s still in a period of serious change.

Cell C has released a trading update today, 27 November, which looks at the group’s audited results for the 2021 and 2022 financial Years, its 2023 January to September results (2023 YTD results) and its Q3 2023 results.

Starting with the 2022 financial year (FY22), revenue dropped by 9% compared to FY21 despite an increase in the customer base.

“The network transition implemented in line with Cell C’s capex-light operating model resulted in an increase in roaming costs. Despite the increase in direct costs, the gross margin percentage improved from 29% in 2021 to 30% in 2022 due to a change in product mix,” the group said.

“EBITDA (Earnings before interest, taxes, depreciation, and amortisation) was reduced by 509% due to revenue reduction, the continued evolution of direct expenditure in line with the network transition plan, and lower operating costs. Due to the network transition, a declining asset base reduced site operating expenses within operating expenses.”

However, the group’s net profit before tax was R5.2 billion in FY22, primarily due to recapitalisation and the continuation of the network transition.

“Although the recapitalisation included debt restructure, the financing costs remained high in 2022 as recapitalisation only occurred in Sep’22,” the group said.

“The large once-offs in 2022 in other gains relate to the recapitalisation impact. A benefit of R8.9 billion was realised due mostly to the debt concessions related to recapitalisation. The other gains would not repeat in 2023 as these relate to the recapitalisation transaction.”

The group’s key financial metrics for FY22 can be found below:

Source: Cell C

Although the group said 2023 is a rebasing year, it has maintained its revenue position of R10.09 billion (YTD Sept ’23) versus R10.14 billion in 2022.

The average blended revenue per user (ARPU) – a combination of Prepaid and postpaid service revenue – increased from R74 in FY22 to R80 by the end of 2023 YTD due to an “increase in high-quality subscribers.”

That said, the group’s direct expenses increased by 7%, mainly due to the finalisation of the network transition.

“The increase in roaming costs directly impacts the gross margin, which also shows a reduction of 23%. This will continue to be a difference between Cell C and the balance of the industry,” the group said.

Nevertheless, the group said that the focus on key performance indicators has begun to yield results, with Q3 2023 showing revenue and cost management improvements.

“This entailed driving the return to growth and profitability, leveraging the improved network quality, and creating awareness with customers on the better connectivity, as well as launching propositions to induce trial,” the group said.

Thus, the group recorded an overall revenue growth of 1.5% (R50 million) from Q3 2022 to Q3 2023, driven by the improved execution in Prepaid and the growth in wholesale, postpaid and equipment sales. Q3 2023 is thus the first quarter of growth compared to the previous year.


“With our newly formed management team, building a great culture, a fully operational network, and a robust strategy, Cell C is well-positioned to drive growth and profitability,” Cell C CEO Jorge Mendes said.

“We have implemented several strategic initiatives to drive revenue generation and reverse the struggling performance we experienced in the past.”

The group is confident that the deduction in its asset base as per its capex-light model will allow it to focus on driving profitable growth in the future.

“I am pleased that in the last quarter of 2023, we are seeing improved performance momentum. By leveraging our robust network infrastructure, we aim to capitalise on growth opportunities in the market and deliver sustainable performance in coming years,” Mendes added.

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