Cell C makes R3.9-billion loss

Cell C has released its annual results for the year ending December 2019, reflecting a net loss after tax of R3.94 billion for the period.

The net loss after tax includes non-cash impairments to the value of R3.28 billion.

The mobile operator said that it has delivered improved operational efficiencies which reflected in relatively positive changes throughout the last six months.

Compared to the first six months of 2019, gross profit increased by 9% and EBITDA more than doubled to R1.7 billion in the last six months.

Cell C CEO Douglas Craigie Stevenson said the effects of the company’s turnaround strategy, which was implemented from March 2019 onwards, are now visible.

Turnaround strategy

Cell C’s turnaround strategy is focused on operational efficiencies, including cutting costs that do not translate into revenue generation and minimizing its operating expenses.

It includes a new network strategy which comprises an evolution away from its infrastructure-based network, which had high fixed costs.

“Operationally the business is stronger and a successful recapitalisation will secure the long-term sustainability of Cell C,” Craigie Stevenson said.

Cell C saw a significant loss in subscribers over the past year, with its prepaid and postpaid customer bases dropping by 21% and 5% respectively.

“Although there was a decrease of 2.9 million prepaid customers – a 21% drop – in the 12 months to 2019, the margin on our existing customers is better as a result of acquiring profitable customers and not signing on a customer at any cost,” said Cell C CFO Zaf Mahomed.

“Revenue from equipment sales, on a year-on-year basis, was 27% down as we moved away from subsidising customers at all costs.”

“This enabled us to build a quality customer base with better margins and quality of service,” Mahomed said.

Network strategy

Craigie Stevenson noted that Cell C’s financial results are based on an old business model, adding that the company’s new business model will provide better results.

“We are shifting from a build and buy strategy with high capital expenditure to a roaming model. By effectively managing traffic we ensure the network cost is aligned with the network revenue,” Craigie Stevenson said.

“It does not make economic sense to continue to invest in capital-hungry infrastructure and the business is now positioned to go into the next phase with our roaming agreement.”

The company plans to improve operational efficiencies and continue to implement its new network strategy with its roaming partner MTN, while also preparing for a recapitalisation.

Cell C is now an operationally-sound business that is financially viable and competitive, Craigie Stevenson said.

“The business performance allows for a successful recapitalisation to take place with a sustainable debt profile.”

“We are optimistic that the hard work of fixing the operations prepares us to conclude the recapitalisation and to continue to be a customer champion delivering innovative service offerings.”

Cell C provided an infographic which details the evolution of its business model, pictured below.

Cell C step change

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Cell C makes R3.9-billion loss