Cell C has a problem
Cell C’s financial results for the year ended 31 May 2026 revealed that the average revenue per new user is much lower than that of its existing customer base.
This, in turn, will put pressure on the company’s margins, which it previously said it wanted to avoid.
On Friday, 21 August 2026, Cell C published its first full reporting period following the Johannesburg Stock Exchange (JSE) listing in November 2025.
The first thing it mentioned was that it added 1.3 million subscribers year-on-year, which reversed the trend of declining subscribers.
Cell C added that it had grown wholesale service revenue by 20% and materially strengthened its balance sheet.
Group revenue was R12.641 billion and service revenue R11.641 billion. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) were R5.509 billion.
However, this included one-off gains arising from the restructuring transaction. Excluding those items, adjusted EBITDA was R2.381 billion.
Cell C said that the latest reporting period was defined by three structural achievements:
- The November 2025 JSE listing and the balance sheet restructure that followed.
- Independent recognition of network quality.
- The completion of the CEC acquisition and integration, restoring full ownership and control of the postpaid base.
“The turnaround delivered what it promised. We have built network credibility and rebuilt and grown the customer base,” Cell C CEO Jorge Mendes said.
“We have entrenched ourselves as South Africa’s leading wholesale platform and earned back customer trust.”
Looking at Cell C’s subscriber growth
In its results presentation, Cell C highlighted that its subscriber base increased by 19% to 8.884 million.
This excludes 5.713 million Mobile Virtual Network Operator (MVNO) subscribers recorded on the Home Location Register (HLR).
At first sight, this looks positive. However, delving into the 1.3 million new subscribers reveals a concerning trend.
Basically, all of the growth came from Cell C’s prepaid segment, where subscriber numbers increased from 6.774 million to 8.068 million.
At the same time, the average revenue per user declined from R78.00 in the 2025 financial year to R71.20 in the 2026 financial year.
That means that the average revenue per user of the 1.294 million new prepaid subscribers was R35.61.
Simply put, Cell C’s new prepaid subscribers spend 54% less than its existing subscribers. This is a problem.
Declining ARPU is a red flag for mobile network operators. When revenue per user shrinks, fixed costs consume a larger share of gross revenue.
A lower ARPU also reduces customer lifetime value. If the customer acquisition cost remains stable or rises, the unit economics deteriorate.
This is why financial markets view ARPU as a primary gauge of pricing power and customer monetisation. Sustained ARPU degradation leads to credit rating downgrades and lower equity valuations.
Cell C tried to avoid this situation in the past
The latest data is in stark contrast to Cell C’s strategy to shed low-end, low-ARPU customers as part of its turnaround plan.
In 2023, Cell C said that reducing its low-ARPU subscribers was a core pillar of its operational turnaround and financial restructuring.
At the time, Cell C’s customer base declined by 4.5 million customers in a year and three months, which it said it was happy with.
Cell C explained that it deliberately focused on shedding low-value customers and retaining its more profitable customer base.
As part of its turnaround strategy, Cell C said it wanted to rationalise its subscriber base, retain profitable customers, and increase its average revenue per user.
Former CEO Douglas Craigie Stevenson and new CEO Jorge Mendes said that Cell C was prioritising value over volume.
They said that losing market share in raw subscriber numbers to competitors like Telkom, Vodacom, and MTN may look alarming on paper.
However, they explained that it was necessary to stabilise earnings before interest, taxes, depreciation, and amortisation (EBITDA) and eliminate bad debt.
This strategy seems to have been discarded, as Cell C has signed up 1.3 million new customers whose ARPU is 54% lower than that of its existing customers.
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