Cell C is struggling to pay its bills for roaming on MTN’s network, according to financial data from MTN’s interim results for the period ended 30 June 2019.
“As a result of the reassessment and in compliance with IFRS 15 Revenue from Contracts with Customers, we have not recognised revenue amounting to R393 million for network roaming services provided to Cell C during the period,” the company said.
“MTN did not recognise all revenue accrued on satisfied performance obligations. Revenue was only recognised on completed services based on the non-refundable consideration received and the group impaired the receivable balance recognised by R211 million,” MTN said.
“We are evaluating a sustainable solution to the agreement with Cell C.”
MTN and Cell C entered into a network roaming agreement in October 2018, although delayed payments have forced MTN to evaluate the roaming agreement to find a sustainable resolution.
Speaking at MTN’s results presentation in Johannesburg, MTN Group CEO Rob Shuter confirmed that Cell C was not able to make the required payments on time. This resulted in MTN failing to recognise the network’s revenue in its financial statements.
“Cell C operational challenges affected our accounting in the first half of 2019. If some payments are delayed, you need to put some provisions through, and not recognise some payments,” Shuter said.
“For the May invoice we did get paid, and for July. For the first half of 2019, the treatment that we took was appropriate.”
Expanded roaming agreement
Cell C released a statement on 7 August that it had expanded the terms of its roaming agreement with MTN to better control its capital expenditure and operating costs.
“This agreement lays the groundwork for a broader national roaming agreement, supporting the policy goals of avoiding network duplication and the burden on the environment, where shared infrastructure drives efficiencies in the delivery of services to consumers,” said Cell C CEO Douglas Craigie Stevenson.
“This is in line with our commitment to launch a business model that drives efficiency throughout the business,” Craigie Stevenson said.
Shuter confirmed that the companies had revised the terms of the roaming agreement, adding that it would take some time to implement these changes to their full extent.
“We have signed terms of agreement to expand that national roaming contract,” Shuter said. “I think that will be positive for them to manage their capital expenditure.”
“It is going to take a couple of months to get those agreements in place. We are hopeful that things will look better in the second half of 2019 on that front.”
“We believe the situation for Cell C is looking positive. The expanded agreement will significantly assist them if it is implemented,” he said.
Shuter added that MTN would still be able to collect on outstanding invoices which are due and payable by Cell C.