C for yourself
THE FIRST four years are make or break for any cellular startup, and five years after the launch of Cell C, recently appointed chief financial officer Fabrizio Mambrini says the turbulent times for SA’s smallest network operator are almost over. This is despite negative pronouncements by ratings agencies.
The operator has found it difficult to capture a share of a market fiercely defended by entrenched operators Vodacom and MTN, which had an almost 10-year head start, resulting in it battling to break into the black.
Cell C’s negative liquidity outlook late last year and lower-than-expected EBITDA in the third quarter prompted credit rating agency Standard and Poor’s (S&P) to lower the company’s long-term corporate credit rating to B- from B, affirming an earlier pronouncement by another rating agency, Moody’s.
So negative was the company’s third-quarter outlook that S&P expects a further possible downgrade this year. S&P says the company has insufficient liquidity to cover short-term obligations. The rating agency also says there is inadequate support from controlling shareholder Saudi Oger.
Mambrini says: “I’ve not been long here but I can tell you that the S&P’s pronouncement does not fairly reflect the company’s improving liquidity. And on what did they (S&P) base Saudi Oger’s commitment to the company? I’ve been seconded to Cell C from the controlling shareholder and I cannot assure stakeholders more of the Saudi Oger group’s commitment to Cell C.”
Dismissive of the rating agencies forecasting, Mambrini is, however, concerned about their fascination with Cell C’s debt position. Considering the success of CE Jeffrey Hedberg’s turnaround strategy, industry observers canvassed for opinion said that although the company faced various challenges, S&P’s recent rating seemed a tad harsh.
Khulekani Dhlamini, a telecoms analyst at Renaissance fund managers, says: “Since Hedberg took the reins early last year, the company has been aggressively positioning itself as the alternative to the more established operators, which has seen it improve its net subscriber additions.”
Mambrini agrees with this view, saying the group’s subscriber base has finally hit the psychological 4m mark despite lacking services such as 3G for intensive data users. Whereas rival operators Vodacom and MTN have experienced a sharp decline in subscriber average revenue per user (ARPU) from R135 to R95, Cell C’s subscriber ARPU has steadfastly remained consistent at around R135. Having invested massively in infrastructure over the last two years, nearly 90% of its traffic flows on its network.
However, subscriber response to recently launched products such as the Woza weekend campaign – enabling Cell C users to make free intra-network calls on weekends – has been a drawcard for SA’s smallest network operator. By and large, Hedberg’s strategy seems the biggest factor in Mambrini’s optimism. The idea to identify and offer products such as Woza weekend that are suitable to the LSM 7 market has augmented the subscriber recruitment drive.
“It’s not just about impressive subscriber figures, the expenditure of our subscribers is equally critical. We’d rather have fewer subscribers making meaningful income-generating calls than a huge subscriber base that accounts for nothing.”
Although much needs to be done to level the playing field, Mambrini is enthusiastic about the local regulatory landscape. He sees it as being far more favourable than that of countries such as Turkey. “I’ve seen better and worse but SA isn’t far off the mark,” he says.
Mambrini, who replaces Muhiedine Ghalayani, who has returned to the group’s parent company, was formerly director of international operations for Oger Telecom Saudi Arabia, based in Turkey, where he supported all group subsidiaries in business development strategy and planning.
Hedberg says of his company’s new CFO: “His appointment is a boost for Cell C’s executive team because of his experience within the Oger group as well as his extensive knowledge of the European telecommunications landscape. Apart from his financial expertise, his development and strategy acumen in the telecommunications sector has brought another dimension to the company.”
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