Cell C has negative working capital
Cell C’s current liabilities far exceed its current assets, suggesting the company remains in some financial distress and has negative working capital.
The mobile network operator published its unaudited half-year financial results on Friday, with Cell C CEO Jorge Mendes saying the company had reached a turning point.
While the results included many positives, including a return to profit and subscriber growth, Cell C’s current liabilities also exceeded its current assets by a substantial margin.
Cell C’s balance sheet showed that its current assets were nearly R3.22 billion, while current liabilities stood at over R5.55 billion, yielding a difference of R2.34 billion.
Although this is a substantial improvement from last year’s R8.05 billion excess of current liabilities over current assets, Cell C’s current ratio is still 0.579:1 — much worse than its sector peers.
A comparison of Vodacom, MTN, and Telkom’s latest interim financial reports shows that their current ratios are close to 1.
The current ratio, also called the working capital ratio, is a standard liquidity metric used to assess a company’s ability to pay its short-term obligations.
If a company has a very high current ratio relative to its peer group, it suggests that management may not be using its assets efficiently.
However, a current ratio below the industry average may indicate a higher risk of financial distress or default for the company. This is Cell C’s situation.
Cell C said it encountered liquidity constraints during the six-month period from 1 June to 30 November 2025, due to various factors.
It highlighted the seasonal nature of working capital requirements and elevated cash outflows related to its technological modernisation drive, capacity rebasing, and capex investment payments as the primary drivers.
“In response, management has prepared detailed cash flow forecasts extending at least twelve months beyond the approval date of these financial statements,” it stated.
“These incorporate rigorous downside scenario analyses that consider key variables such as revenue trends, customer churn, device financing recoveries, and the availability of funding.”
These forecasts include a range of in-progress mitigation strategies, including cost optimisation, the deferral of selected non-essential capital projects, and better utilisation of Cell C’s debt facilities.
“Based on the outcomes of these assessments and the mitigatory actions undertaken, the directors are satisfied that Cell C will maintain adequate liquidity to meet its obligations for the foreseeable future,” it said.
“Accordingly, the directors have not identified any material uncertainties that may cast significant doubt on the group’s ability to continue as a going concern.”
| Listed network operator | Current Assets | Current Liabilities | Current Ratio |
|---|---|---|---|
| Cell C | R3.22 billion | R5.55 billion | 0.579:1 |
| MTN | R156.9 billion | R168.6 billion | 0.931:1 |
| Vodacom | R79.1 billion | R72.6 billion | 1.089:1 |
| Telkom | R17.6 billion | R15.8 billion | 1.117:1 |
Cell C meets obligations despite constrained liquidity
Cell C explained that its current assets comprise R1.7 billion in trade and other receivables, which is largely network operator costs and the net receivables from its postpaid book.
“The average net receivable days are roughly 10 due to the upfront nature of Cell C debtors’ book,” it stated.
Meanwhile, under its current liabilities, trade and other payables of R4.2 billion break down roughly as follows:
- Roaming obligations — 28%
- Service fulfilment obligations — 17%
- OEM and postpaid related costs — 20%
- Other creditors within terms — 24%
- Net accruals
“The average creditors days are 75 days, and the core creditor terms remain 60 days,” Cell C stated.
“Although for the half year liquidity remained constrained, we continued to meet our obligations. The African Bank facility has reduced to R1.4 billion from R1.9 billion.”
Asked for comment on its negative working capital position, Cell C said that focusing solely on its balance sheet was a mistake given the unique structure of these results.
“The income statement reflects Cell C on a standalone basis, while the balance sheet reflects the newly combined business. This creates an inherent mismatch in the interim period,” it said.
“For a more representative view of operating performance, one can look at the adjusted EBITDA of R917 million for Cell C and add the CEC EBITDA contribution. This results in R1.444 million for the six months.”
When annualised, EBITDA would be approximately R2.888 million. Using this annualised figure against net debt of R2.390 million results in a net debt to EBITDA ratio of 0.83.
”We believe this is a more meaningful indicator of the business’s financial position,” said Cell C.
”Cell C’s reported net debt to EBITDA ratio reflects the specific dynamics of this reporting period, which includes once‑off gains.”
As it moves toward its full‑year results, Cell C said investors will be able to rely on a 12‑month historical rolling EBITDA, which will provide a clearer and more comparable view of underlying performance.
Turning point for Cell C — CEO
Mendes said that these interim results marked a turning point for Cell C. “The structural actions we have taken are beginning to translate into operational momentum and a stronger financial foundation.”
Cell C reported a return to profit, reversing its R149.2 million loss from the previous period to a R3.36 billion profit.
This was despite a 5.2% year-on-year decline in topline revenue from R5.68 billion to R5.99 billion.
Revenue in the prepaid segment grew 1.6% year-on-year, from R2.69 billion to R2.74 billion, while postpaid revenue increased by 2.3% year-on-year, from R1.14 billion to R1.16 billion.
Cell C’s average revenue per user (ARPU) also increased in its postpaid segment. ARPU increased by 4.4% year-on-year from R220 to R230.
However, the same can’t be said for its prepaid segment. ARPU in this segment declined by 8.4% year-on-year, from R78 to R71, which Cell C attributed to an effective 14% reduction in data tariffs.
The prepaid segment saw significant year-on-year subscriber growth, with Cell C’s prepaid customers increasing from just under 6.92 million in the first half of 2025 to 7.83 million in the first half of 2026.
Meanwhile, Cell C’s postpaid subscriber base declined year-on-year, from 847,900 in the first half of 2025 to 784,600 in the first half of 2026, representing a 7.5% reduction.
“While the postpaid subscriber base declined by approximately 13,750 subscribers in the six-month period, this was largely impacted by the clean-up of the user base,” it said.
Cell C explained that this included migrating roughly 40,000 subscribers from postpaid to prepaid over the six-month period.
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