Cell C is losing customers, but that is part of its plan
Cell C has been losing customers but its revenue has increased slightly, according to Blue Label’s financial results for the six months ended November 2019.
Speaking at the company’s interim results presentation, co-CEO Mark Levy said that Cell C has been reviewing the profitability of its product lineup.
This review included the discontinuation of Cell C’s wholesale fixed-LTE business and its Black streaming service.
Levy added that Cell C’s service revenue increased by 1% year-on-year and its EBITDA increased by 2%.
He noted that this revenue increase was achieved despite the operator losing customers as a result of its increased focus on retail pricing.
Levy did not state how many customers Cell C lost during the period but noted that the mobile operator would divulge more information in its financial results, which are expected to be released in March 2020.
No more chasing customers at all costs
Cell C CFO Zaf Mahomed expanded on the operator’s overhauled retail pricing strategy, stating that the company would not sign up customers at any cost as it had done previously.
“For a long time we were chasing customers at any cost,” Mahomed said. He added that this created a lot of traffic on the network and led to negative customer experience.
“We are moving away from chasing customers at all costs,” he said. “That is part of the process for us to be operationally cash positive.”
Mahomed added that by implementing this new strategy, Cell C would improve the profitability of its mobile operations.
“It prepares us for the new operating model we are going to have going forward. It is our way of ensuring we are profitable and sustainable as a business.”
Mahomed added that Cell C had received numerous acquisition offers and was in negotiations with potential buyers, but was unable to provide further details.
Roaming agreement and recapitalisation
In its financial results, Blue Label emphasised the importance of Cell C’s roaming agreement with MTN for the financial health of the struggling mobile operator.
The expanded roaming agreement signed by the two parties will result in substantial cost savings for Cell C by reducing its network and capex spend, Blue Label said.
Blue Label added that a recapitalisation of Cell C is essential to avoid further defaulting on debt repayments.
This follows Cell C defaulting on the payment of interest on its $184,002,000 loan – which was due in December 2019.
“A capital restructure programme is in process and if successfully implemented would have a positive impact on Cell C’s solvency and liquidity position,” Blue Label said.
It warned, however, that “these ongoing matters cast significant doubt over Cell C’s ability to continue as a going concern”.
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