Cell C lost nearly a third of its customers

Blue Label Telecom has provided an update on Cell C’s turnaround strategy, which revealed that Cell C has lost nearly a third of its subscribers between June 2019 and May 2020.

While this big reduction in subscribers may concern some investors, Blue Label Telecom highlighted that it did not have a significant impact on service revenue.

Cell C’s service revenue only declined by 2% during the reporting period – down from R14.247 billion to R13.901 billion.

Blue Label Telecom explained the loss in subscribers has resulted in an increase in the quality of its subscribers.

It said Cell C was not wasting commercial expenses to acquire customers that are not providing a return.

Cell C explained it has been actively managing its customer base by pursuing more profitable customers.

“This has resulted in a reduction in the Cell C customer base. With a decline on 28% of the base, we have maintained and grown revenue based on the trend,” it said.

Cell C has also removed non-profitable products and increased its focus on retail product pricing.

This helped to increase Cell C’s EBITDA by 10% from R3.391 billion to R3.744 billion.

The chart below shows Cell C’s service revenue versus total subscribers over the last year.

Management remains upbeat about Cell C’s prospects

Blue Label Telecom’s management said it remains upbeat about Cell C’s prospects and is of the opinion that Cell C will continue as a going concern for the foreseeable future.

It highlighted many positive developments at the mobile operator, which include:

  • Cell C concluded the national roaming agreement with MTN on 7 August 2019, which became effective on 4 May 2020.
  • This agreement is one of the key pillars in Cell C’s transformation plan as well as its long-term network strategy to optimise operating costs and reduce capital outlay as part of the turnaround strategy.
  • This agreement is anticipated to positively impact the cost base and future cash flows on the successful implementation of this transaction.
  • The board of Cell C established a liquidity committee to monitor the liquidity position of Cell C and to ensure that the business is not trading recklessly during the negotiations of the recapitalisation and debt restructure.
  • Although the liquidity position of Cell C remains challenging, Cell C has proven that it has managed to continue trading despite the liquidity concerns and management is confident that this committee will manage the liquidity position of Cell C until the conclusion of the recapitalisation process.
  • Cell C appointed independent financial restructuring advisers to assist in stringent monitoring of the liquidity of Cell C as well as designing the revised business plans that support the new operating business model.
  • Management remains optimistic that the planned recapitalisation of Cell C will be successful. The recapitalisation is important to improve the capital structure of the company and the deferral of repayments that will support the long-term sustainability of Cell C.
  • Stakeholders have appointed independent advisers to assist with the recapitalisation and/or debt restructuring process and formal engagements are ongoing.

“Although no certainty exists around the successful implementation of the recapitalisation, management remains optimistic,” Blue Label Telecom said.

Now read: Cell C is retrenching staff, but it says its financial position has not deteriorated

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