Cell C’s 19% revenue rise lags behind growth of rivals

Cell C is lagging behind the growth rates of its bigger rivals, Vodacom and MTN, according to its latest set of financial numbers.

The country’s smallest cellular company said on Thursday that revenue for the year to December rose 19 percent to R6.5 billion, but profit fell 15 percent as the company took a knock from the start-up losses of Virgin Mobile South Africa, which it owns jointly with the Virgin Group.

Cell C’s revenue growth rate is slower than those of MTN and Vodacom. For the year to December, revenue for MTN’s South African business rose 25 percent to R25 billion.

Vodacom reported a 24.1 percent jump in revenues to R31.1 billion for the year to March 2006.

Cell C’s subscriber growth rates also lagged those of Vodacom and MTN. It grew subscribers by 14 percent to 3.3 million. By contrast, MTN’s subscriber numbers rose 22 percent to 12.5 million last year and Vodacom’s jumped 49 percent to 19.2 million for the year to March 2006.

Cell C, which has attracted unsolicited buyout offers, has yet to make a profit after six years of operation.

But chief executive Jeffrey Hedberg remained upbeat about the company’s prospects, saying he was hopeful it would report a maiden profit in the next two years.

Hedberg said Cell C continued to perform well in a market characterised by fierce competition and an imprecise regulatory environment. Its average revenue per user (Arpu), including community service telephones, rose 8.2 percent to R159. Arpu measures how much each subscriber spends on phone calls and sending data such as SMSes each month.

"Our continued growth in subscriber numbers, blended Arpu and airtime revenues has contributed to Cell C’s strong year-on-year growth in revenue and gross margin," said Hedberg.

But the company’s earnings before interest, tax, depreciation and amortisation (Ebitda) were dented by the consolidation of the Virgin Mobile joint venture. Ebitda fell 15.3 percent to R458.8 million.

Cell C and Virgin Mobile each invested R250 million to form the R750 million joint venture.

Virgin Mobile was brought in to help Cell C attract the high-end market. It is said to have gained postpaid customers from MTN and Vodacom. Cell C claims to have gained 40 percent of the 33 000 customers who have switched networks since mobile number portability was introduced in November.

Hedberg said Virgin Mobile had not yet met its targets, but the company had a new management team and a new plan, and new targets had been set.

Hedberg has come up with a plan to boost the performance of Cell C.

It includes partnering with Zola, the television personality and musician, to target households with monthly income of R1 000.

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Cell C’s 19% revenue rise lags behind growth of rivals