Cell C on the mend post recapitalisation, says CEO

Having completed its year-long recapitalization, mobile operator Cell C is confident it now has a firmer footing for continued growth.

Over the past three years, the focus has been on executing a turnaround strategy, launching a new business model and managing the transition of our network. This is the background to our quest to create a solid financial foundation while implementing meaningful operational changes,” says the CEO of Cell C Douglas Craigie Stevenson.

The group, which jointly released its financial results for the year ended December 31, 2021 and the six months ended June 30, 2022 on Thursday, reported stable earnings for the first six months of 2022.

For the six months ended June 30, revenue decreased slightly to R6.51 billion compared to R6.59 billion reported for the six months ended June 30, 2021.

For the year ended December 31, 2021, Cell C saw sales decline 5% to R13.4 billion, compared to R14.13 billion in 2020.

The prepaid segment, including prepaid broadband, accounted for 45% of revenue at R2.96 billion in H1 2021, while revenue from the prepaid subscriber base contributed 47% of total revenue at R6.27 billion for the year ended in December 2021.

The group’s subscriber base grew 4% year-on-year to end-December 2021 to 12.98 million with an average revenue per user (apru) of R81.09 before shrinking 1% to R80 million to R80 with an arpu .11, by the end of June.

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The group posted a net loss of R1.99 billion for the first half of 2022, compared to a net profit of R148 million for the six months ended 30 June 2021.

On a full-year basis, Cell C reduced its net loss from R5.38 billion in 2020 to R396 million in 2021.

Cell C reported earnings before interest, taxes, depreciation and amortization (Ebitda) of R366 million for the first half of 2022, down from R1.28 billion in the first half of 2021.

In the year ended December 2021, Ebidta fell to R2.58 billion from R2.89 billion in 2020.

Recapitalization costs continued to negatively impact Ebitda in both periods.

Earnings before interest and tax (EBIT) for the first six months of 2022 were reported at a loss of R1.09 billion compared to a profit of R667 million for the comparable six months of the previous year.

This was attributed to impairments in the first half of 2022 and as a result of audit adjustments and the business transition to the new operating model and included foreign exchange losses of R155.2 million on legacy foreign currency debt and R694.7 million. million One-off costs for recapitalization costs, liquidity support and conversion of financing to operating leases.

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For the year ended 31 December 2021, EBIT improved to a profit of R1.6 billion due to cost optimization measures compared to a loss of R3.5 billion in 2020 due to a R5.04 billion network impairment Financial assets. Also included in the 2020 pre-tax loss is R1.5 billion in interest payable and R519 million in foreign exchange losses, which will be significantly reduced after the recapitalisation.

Financial and foreign exchange losses in 2021 were 282 million rand higher due to the frozen debt repayments and foreign exchange losses resulting from a weakening rand.

“The interest charges and foreign exchange losses that have weighed on Cell C in recent years will be significantly lower after the recapitalization as external debt will be reduced to zero and the one-off costs associated with the recapitalization will be fully absorbed in fiscal year 2022,” says Cell C CFO Lerato Pule.

“We’re almost there. Over the last 18 months, we’ve been actively focused on optimizing our network operating expenses, finance leases, capital expenditures (capex) and roaming costs. We will invest again in our billing and network systems. Our Capex-Light infrastructure model will become one ensure a sustainable liquidity position for the company.”

Cell C operating expenses for the six-month period increased to R6.15 billion from R5.32 billion in H1 2021, driven by higher recapitalization costs and liquidity support, offset by lower network costs and transition costs.

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For the year ended December 31, 2021, operating expenses decreased to R10.79 billion from R11.24 billion.

“With a delevered balance sheet, a capex light model, our robust spectrum, a loyal and profitable customer base and a resilient brand to underpin our transformation journey, Cell C is well positioned for the future,” continues Craigie Stevenson, noting the progress of made by the company.

Through its network strategy, Cell C has significantly increased its network presence over the past 18 months.

At the end of September 2022, cell C had access to 9,131 sites, versus 3,000 sites, over 96.5% of which were activated for long-term evolution.

Six provinces were 100% migrated and all that remain are the Western Cape, KwaZulu-Natal and Gauteng accounting for 88%, 57% and 33% respectively.

“We are systematically increasing our capacity and will soon have 14,000 locations, which will allow us to compete with the largest operators in the market,” adds Pule.

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