Sasfin Securities Deputy Chairman David Shapiro has described Cell C as an abysmal failure which has failed to live up to expectations.
Speaking on Business Day TV, Shapiro said Cell C will have a tough time competing effectively against Vodacom and MTN, considering its current financial situation.
Ratings firm S&P Global recently downgraded Cell C’s corporate credit rating to the lowest junk-level rating on its scale after it missed an interest payment on a senior secured bond.
S&P Global said Cell C’s revised recovery rating and lower recovery prospects are partly due to uncertainty over a potential buyer’s ability to have unrestricted use of Cell C’s spectrum.
The missed payment and subsequent downgrade has raised questions about Cell C’s financial future, with Shapiro not upbeat about its prospects.
“They captured a little bit of the market, but have not gone anywhere near where the projections were,” said Shapiro.
He said competing in the mobile network space was a capital-intensive business, with Vodacom and MTN investing close to R10 billion each year in their networks.
Cell C does not have the resources to do the same. It also has to spend money on marketing if it wants to take market share away from Vodacom and MTN.
Even with a capital injection from the planned Blue Label Telecoms deal, and a restructuring of debt, it is questionable whether Cell C will have enough money to keep investing in its network.
“My biggest concern is whether the new shareholders are going to have the money to keep the infrastructure going,” said Shapiro.
He said there will be a race to sign up enough new subscribers before the money runs out.
“If I was the Levy brothers, I would have taken the money and just enjoyed it. Why take this kind of risk in this kind of market?” said Shapiro.