Mobile operator Cell C on Thursday (September 29) issued a market update on its future post-recapitalization “as an entity of convenience.”
The competitive company wants to develop into a “digital lifestyle company” with new customer offers and platform solutions. A number of these initiatives are to be implemented in the coming months, it said.
It also gave an update on its scalable and cost-effective network strategy, which began in 2021 and is “on track to be completed by the end of 2023.” It also shared with the market its approach to new customer offerings and platform solutions after the recapitalization process.
Cell C said its recapitalization, which was completed earlier this month, deleveraged its balance sheet and improved its overall cash position.
Cell C CEO Douglas Craigie Stevenson said that the focus over the past three years has been executing a turnaround strategy, launching a new business model and managing the transition of its network.
“This is the background to our efforts to create a solid financial foundation while implementing significant operational changes,” he said.
Cell C delivered by revenue and customer base
The group said it has managed to maintain a stable customer base over the past 18 months despite difficult market and trading conditions.
Economic conditions such as the impact of Covid-19 and the resulting economic slowdown, exacerbated by ongoing load shedding, impacted consumer and business confidence and ultimately consumer spending over the past 18 months.
The above factors resulted in a drop in revenue from churn, lower gross adds, lower average spend per user, and higher discounts given to attract the desired customer base. In addition, the delays of the complex recap process and the difficult adjustment phase for Cell C must be taken into account when reviewing the company’s performance.
Despite these challenges, total sales remained stable at R6.51 billion for the first six months to June 2022 (H1 2021: R6.59 billion). Comparing revenue for the 12 months from January to December 2021 year-on-year showed a 5% decrease to R13.4 billion (FY2020: R14.13 billion).
The bulk of revenue continues to come from the prepaid segment, including prepaid broadband, which accounted for about 45% of total revenue at R2.96 billion in H1 2022 (H1 2021: R3.03 billion), it said.
In 2021, revenue from the prepaid subscriber base, including prepaid broadband, contributed 47% to total revenue at R6.27 billion (FY2020: R6.22 billion).
Total ARPU for H1 2022 was up 2.6% at R80.11 (H1 2021: R78.07) and for the full year to December 2021 total ARPU was stable at R81.69 (FY2020 : 81.09 margins).
Impact on EBITDA
In the first half of 2022, direct spending was R4.7 billion, up 29% from the same period in 2021. This is mainly due to liquidity support and roaming costs, offset by some savings in operational costs, he said the operator.
Direct spend for full year 2021 was R7.6 billion (FY2020: R7.2 billion), up 6% year-on-year, while gross margin was lower at R5.74 billion (FY2020: R6, 91 billion rand). Recapitalization costs continued to have a negative impact on EBITDA in both reporting periods.
EBIT for the first half of 2022 was a loss of R1.09 billion (H1 2021: profit of R667 million) mainly due to impairments in the first half of 2022 as well as audit adjustments and the transition of the business to the new operating model, the group said.
Lerato Pule, Cell C’s new chief financial officer, said that the interest charges and foreign exchange losses that have weighed on Cell C for the past several years will be significantly lower after the recapitalization as external debt is reduced to zero and the one-off payment is made to those with The costs associated with recap will be fully covered in the 2022 financial year.
“We’re almost there – for the past 18 months we’ve been actively focused on optimizing our network operating costs, finance leases, capital expenditures and roaming costs. We will invest again in our billing and network systems. Our Capex Light infrastructure model will ensure a sustainable liquidity position for the business.”
Network migration 61% complete
Through its network strategy, Cell C has significantly increased its network presence over the past 18 months. At the end of September 2022, it had access to 9,131 websites, versus 3,000 websites, with over 96.5% LTE activation.
Six provinces have been 100% migrated and all that remain are the Western Cape, Kwa-Zulu Natal and Gauteng, accounting for 88%, 57% and 33% respectively, it said.
“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,” said Pule.
“With a delevered balance sheet, an easy investment model, our solid spectrum, a loyal and profitable customer base, and a robust brand to underpin our transformation journey, Cell C is well positioned for the future,” said Craigie Stevenson.
“We are now focused on post-recapitalization with Cell C as a sustainable company 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 to be announced earlier this week. We are armed and ready to be an agile player in the evolving telecoms landscape,” said the CEO.
Read: Blue Label Completes Cell C Recapitalization