{"id":552380,"date":"2007-05-27T10:01:37","date_gmt":"2007-05-27T10:01:37","guid":{"rendered":"http:\/\/localhost:8888\/wordpress\/technology\/552380-cell-c-in-a-bad-moody-2.html"},"modified":"2007-05-27T10:01:37","modified_gmt":"2007-05-27T10:01:37","slug":"cell-c-in-a-bad-moody-2","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/technology\/552380-cell-c-in-a-bad-moody-2.html","title":{"rendered":"Cell C in a bad Moody"},"content":{"rendered":"

Moody\u2019s lambasted Cell C in a report earlier this month, downgrading its ratings and said it was maintaining a negative outlook on the company. Cell C\u2019s corporate family rating downgraded to Caa1 from B3 and its debt issues were also downgraded.<\/p>\n

The ratings actions result from continued weakness in the company\u2019s business and financial profile relative to initial expectations after the release of full year results to December last year, Moody\u2019s said. It identified four main factors as contributing to the weakness. <\/p>\n

It said Cell C faces the challenge of implementing a business plan that grows its subscriber base to address financial and operational deterioration. The company\u2019s highly leveraged capital structure potentially left creditors open to higher default risk and lower recovery levels. Its joint venture with Virgin Mobile had underperformed on initial expectations for attracting subscribers and making progress towards profitability.<\/p>\n

Finally, Cell C still faces a high churn rate despite management\u2019s assertions that these rates were temporary in 2005. \u201cCell C had a 96% churn rate for prepaid subscribers and incurred a 2,9% loss in the number of pre-paid customers in 2006,\u201d Moody\u2019s said. <\/p>\n

Moody\u2019s said it would downgrade Cell C further if liquidity continued to decline, subscriber churn rates were not reduced, or there was further pressure on earnings before interest, taxes, depreciation amortization margins as a result of pursuing or defending market share. <\/p>\n

On Wednesday, Cell C\u2019s chief financial officer, Muhieddine Ghalayini, said Moody\u2019s decision was disappointing. He said the agency had only considered last year\u2019s financial results and not first quarter results from this year. \u201cOur first quarter results are a completely different story,\u201d he said. <\/p>\n

Ghalayini said he was \u201csurprised\u201d by the process Moody\u2019s had followed, as the company had a new strategy and a new management team, which had not been considered. New products had been introduced to the market, and the call centre had \u201cdrastically\u201d improved performance. Cell C\u2019s strategy is to focus on customers in LSMs three to seven. Cell C was now on target with regards to its customer base, revenue, Ebitda \u201cand all levels\u201d. <\/p>\n

The Virgin Mobile joint venture had not met expectations, but its management had been changed and it had a new km plan in place, with targets that it was meeting. <\/p>\n

On the churn rates, he said that \u201cchurn in the industry is high in general\u201d, adding that Vodacom\u2019s churn last year had been more than Cell C\u2019s subscriber base of about 3,3-million. <\/p>\n

Ghalayini said the company did not have a financing problem as it was fully backed by its Saudi shareholder, Oger Telecom.<\/p>\n

Interconnect rates had also held back Cell C\u2019s quest for profitability. With public hearing into interconnection rates by Icasa ongoing, Cell C will be hoping for some action from the regulator.<\/p>\n

Interconnection rates are the tariff one operator charges another to terminate a call on its network. These rates are abnormally high in South Africa and limit operator\u2019s abilities to undercut call rates offered by MTN and Vodacom.<\/p>\n

Cell C will be hoping that the communications authority regulates interconnect to a cost-based tariff, allowing them to aggressively go out and capture more market share.<\/font><\/p>\n

Comments<\/a><\/font><\/p>\n

Mail & Guardian<\/a><\/p>\n

\n","protected":false},"excerpt":{"rendered":"

Cell C\u2019s relationship with Virgin Mobile has not delivered the returns it hoped for, according to a harsh report from international ratings agency Moody\u2019s. The report paints a grim picture of the company\u2019s finances, but this week Cell C\u2019s chief financial officer disagreed with the findings.<\/p>\n","protected":false},"author":23,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_threads_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[17],"tags":[],"class_list":["post-552380","post","type-post","status-publish","format-standard","hentry","category-technology"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/552380"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/23"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=552380"}],"version-history":[{"count":0,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/552380\/revisions"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=552380"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=552380"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=552380"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}