Ratings agency Standard & Poor’s has, for the second time this year, downgraded Cell C’s credit rating in a further vote of no confidence in SA’s third cellphone network operator.<\/p>\n
On Friday S&P said it had lowered its long-term corporate credit rating on Cell C to B- from B, and gave it a negative outlook. <\/p>\n
In June S&P lowered the rating from B+ to B, at about the same time that Moody’s downgraded the company. <\/p>\n
S&P said on Friday that the downgrade “follows lower- than-expected and sequentially declining earnings before interest, tax, depreciation and amortisation in the third quarter ended September 30 2007”.<\/p>\n
This would result in a postponement in its ability to generate cash. <\/p>\n
It said Cell C’s turnaround strategy had boosted its customer base, but that higher costs prevented earnings from accelerating. <\/p>\n
“This on top of the underperformance of its 50% joint venture Virgin Mobile SA that was still far from reaching breakeven.” <\/p>\n
But Cell C CEO Jeffrey Hedberg said on Friday the company “remains upbeat about its improving performance and prospects” despite the new decision by S&P.<\/p>\n
“The view expressed by S&P about Cell C’s ability to grow into its capital structure is unfortunate because the company continues to make significant progress,” he said.<\/p>\n
Cell C chief corporate officer Zeona Motshabi said: “We remain confident about developments in the regulatory environment, which we believe are starting to level the playing field for a late entrant to the market such as ourselves”.<\/p>\n
This week Cell C won a small victory when it was told by the Competition Tribunal that it could question MTN in hearings into anti-competitive behaviour. These hearings follow a complaint by Cell C in 2005.<\/p>\n
MTN has been accused of charging a commercial rate to connect calls made from Cell C’s community service payphones to MTN numbers.<\/p>\n
Cell C believes the interconnection fee should be subsidised, but MTN has previously accused Cell C of not putting community phones in underserviced areas. <\/p>\n
S&P said in its report on Cell C that the company had debt of R11.6-billion at September 30. <\/p>\n
It said too that SA’s cellphone market remained fiercely competitive, and that Cell C’s earnings were weak. <\/p>\n
It said an upgrade was unlikely over the short term, “as improvement is already factored into the ratings. <\/p>\n
‘‘An outlook revision to stable is possible if Cell C manages to generate free operating cash flows in 2008,” S&P said.<\/p>\n