Speaking on CNBC, Theron said that Cell C is hurting the mobile market in South Africa for everyone, including itself, with its aggressive pricing strategy.<\/p>\n
Theron said that Cell C is \u201cbasically burning the furniture over there to stay in business,\u201d and had to raise more money to stay afloat.<\/p>\n
\u201cCell C will be dead within six months. Listen to me now \u2013 they are under such pressure that they basically decimated their own business chasing market share,\u201d he said.<\/p>\n
He added that if\u00a0Alan Knott-Craig<\/a>\u00a0is still the CEO of Cell C in six months\u2019 time he would be very surprised.<\/p>\n Cell C is not obliged to provide its financial details, as it is not a public company, and has not done so since Knott-Craig took the reins in January 2012.<\/p>\n As such,\u00a0Nadim Mohamed<\/a>, investment analyst and partner at\u00a0First Avenue Investment Management<\/a>\u00a0said:\u00a0“Only insiders would know with any certainty whether the ship is sinking or not”.<\/p>\n Cell C CEO, Alan Knott-Craig<\/p><\/div>\n For the 12 month period to the end of December 2010,\u00a0Cell C had R7.5 billion in long-term debt and an additional R500 million in current liabilities.<\/p>\n Revenue improved to R10.2 billion, while earnings before interest, tax, depreciation and amortisation stood at R1.4 billion.<\/p>\n Mohamed noted that in the past, the compnay’s biggest problem has been the high amount of leverage on the balance sheet \u2013 debt levels stood at approximately R8 billion in 2011.<\/p>\n “In addition, their cost structure is higher than their peers due to national roaming costs and the cost of towers they sold to ATC in the past.<\/p>\n “This together with lower tariffs means that they are unlikely to make anywhere close to the 32.3% and 38.2% ebitda margin that MTN and Vodacom make in SA, but I do estimate they are profitable before interest expenses,” Mohamed said.<\/p>\n In July, Knott-Craig said that Cell C is on a three year path to profitability, pointing out\u00a0that operators in SA needed a market share of between 20-25% to be profitable.<\/p>\n South Africa’s third mobile entrant\u00a0received\u00a0an injection of R5.7 billion from\u00a0Oger Telecom<\/a>, the Lebanese-controlled firm with an indirect 75% holding in the SA operator,\u00a0which invested a further $350-million (around R3.5 billion) and key lenders \u201cincluding\u00a0Nedbank<\/a>\u00a0and the\u00a0Development Bank of South Africa<\/a>\u201d which provided R2.2 billion.<\/p>\n “Personally, I do not think they would have received R1.5 billion in 2012 and a further R3.5 billion from Oger Telekom as well as a R2.2 billion loan from Nedbank and DBSA if it was such a \u2018basket case\u2019,” Mohamed said.<\/p>\n And\u00a0Spiwe Chireka<\/a>, program manager of telecoms at the\u00a0IDC<\/a>, agrees. The analyst said that she would expect investors who are prepared to shelve out such a large sum of cash to be prudent. “They must see something in Cell C.”<\/p>\n Chireka said that Cell C has\u00a0definitely\u00a0disrupted the market through its low prices. “If I were MTN and Vodacom I would sit up and take notice,” the analyst said.<\/p>\n MTN Group<\/a>\u00a0president and CEO\u00a0Sifiso Dabengwa<\/a>\u00a0recently warned\u00a0that in some markets where the fourth, fifth or sixth, player will never deliver returns, \u201cthey start doing very destructive things in the market in the hope that it will improve their position\u201d.<\/p>\n Chireka said that from an operators perspective, constant moves to lower prices would obviously have a negative effect on industry players bottom line. “But we do need the Cell Cs of this world to disrupt the market. Its also good for the consumer.”<\/p>\n She continued that, by lowering prices, Cell C would also hope that its volume picks up, and not only its traffic. “You would hope that customers will use your network to call more at lower rates.”<\/p>\n The analyst said that if recent\u00a0figures\u00a0relayed by Cell C could be\u00a0believed, then “its efforts seem to be working”.<\/p>\n SA Mobile Subscribers 2011-2013<\/p><\/div>\n The operator announced on Tuesday (30 July 2013) that it has signed up one million customers in July 2013, taking its subscriber base to 11.7 million.<\/p>\n And according to Mohamed, Cell C would indeed need to get to about 20-25% market share to achieve a sustainable business model. “Fortunately, Oger has been a very supportive shareholder willing to rescue them over the years.”<\/p>\n “I therefore think its unlikely that they\u2019ll go out of business in the next year \u2013 if the regulator creates an environment with fewer barriers to competition, they could potentially do very well and this is what funders are betting on.”<\/p>\n “As South Africans, we should be thankful that Oger remained confident in Cell C over the years as this has led to the lower prices we see in SA today,” Mohamed said.<\/p>\n Cell C dead by 2014: analyst<\/strong><\/a><\/p>\n Cell C sign-ups boom\u00a0<\/a><\/strong><\/p>\n Cell C seeks profitability within 3 years<\/strong><\/a><\/p>\n![\"Alan](\"http:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2012\/03\/Alan-Knott-Craig-Snr.jpg\")
<\/a>Past financial performance<\/h3>\n
Distrupting a dominated market<\/h3>\n
![\"SA](\"http:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2013\/08\/SA-Mobile-Subscribers-2011-2013-3.png\")
<\/a>More on Cell C<\/h3>\n