Cell C faces a serious challenge
Cell C’s expenses are growing much faster than its revenue, which does not bode well for the company’s future financial performance.
On Friday, 13 February 2026, Cell C released its unaudited financial results for the six-month period ended 30 November 2025.
The mobile operator said it was entering a new chapter as a listed business, with strengthened governance and a differentiated, capital-light model.
It said its platform-led growth was accelerating, that it had recorded improving network and customer performance, and that its balance sheet reset was completed.
Cell C said its subscribers declined to 8.63 million, with an additional 5.1 million mobile virtual network operator (MVNO) subscribers.
The company delivered revenue of R5.68 billion, which represented a year-on-year increase of 1.8%.
Cell C said that this performance was commendable in the competitive South African telecommunications environment.
However, Cell C had a problem. Its expenses have increased much faster than its revenue over the six months.
Total expenses increased 16.7% year-on-year to R5.771 billion. This means the mobile operator’s cost of doing business is rising faster than its revenue.
Operating expenses increased 52% year-on-year to R2.053 billion. The biggest factors driving this increase were personnel, IT, and marketing costs.
Personnel costs were up 13% year-on-year, IT expenses increased by 27%, and advertising and marketing rose by 22%.
There were also once-off costs, such as transaction costs of R233 million for the IPO and restructuring, and IFRS 2 costs of R140 million.
“The increase in personnel costs was in line with the internal budget and driven by targeted investment in strategic organisational capacity,” Cell C said.
“IT expenses were higher than the prior year, impacted by the non‑realisation of early‑payment vendor credit vouchers due to timing.”
“The higher spend was primarily due to the concurrent operation of the legacy systems and newly implemented operating environments during the transition period.”
Warning signs for investors
When expenses are growing much faster than revenue, it is often a warning sign for investors, as it can indicate the business may lose the ability to pay for itself.
There are exceptions. When companies invest heavily in rapid future growth, for example, this trend is not concerning.
However, Cell C does not fall into this category. It has suffered declining revenue for subscriber numbers for years.
In Cell C’s case, it should address the situation to avoid profit margin compression and a return to recording consistent losses.
It promised investors improved operating leverage — its ability to increase operating income by growing revenue while keeping costs relatively stable.
However, the latest information raises concerns about negative leverage, where expenses grow faster than revenue.
Simply put, Cell C is spending more to sign up and service subscribers than they did previously. This is often a sign of a broken business model.
If a company isn’t profitable and its expenses are accelerating, it begins to burn cash. This can lead to increased debt, which previously brought Cell C to its knees.
Cell C has informed investors that liquidity remained constrained, but that it continues to meet its obligations.
It added that its African Bank facility has reduced to R1.4 billion from R1.9 billion, which means it is burning cash.
To address this situation, Cell C will need to significantly cut its expenses and achieve a big increase in revenue.
However, this is easier said than done. Cutting marketing and advertising spending, for example, will lead to slower subscriber growth.
Cell C’s biggest challenge is growing its top line. Without revenue growth, the company risks a repeat of the death spiral it faced previously.
The operator did say it was proactively pursuing cost containment through several strategic initiatives and operational adjustments.
It is implementing a range of mitigation strategies to manage liquidity, which include cost optimisation initiatives and the deferral of non-essential capital projects.
It also mentioned a disciplined approach to growth and scaling as a key component of its outlook.
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