{"id":629308,"date":"2026-02-16T09:59:56","date_gmt":"2026-02-16T07:59:56","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=629308"},"modified":"2026-02-16T10:01:15","modified_gmt":"2026-02-16T08:01:15","slug":"cell-c-faces-a-serious-challenge","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/business-telecoms\/629308-cell-c-faces-a-serious-challenge.html","title":{"rendered":"Cell C faces a serious challenge"},"content":{"rendered":"\n

Cell C’s expenses are growing much faster than its revenue, which does not bode well for the company’s future financial performance.<\/p>\n\n\n\n

On Friday, 13 February 2026, Cell C released its unaudited financial results for the six-month period ended 30 November 2025.<\/p>\n\n\n\n

The mobile operator said it was entering a new chapter as a listed business, with strengthened governance and a differentiated, capital-light model.<\/p>\n\n\n\n

It said its platform-led growth was accelerating, that it had recorded improving network and customer performance, and that its balance sheet reset was completed.<\/p>\n\n\n\n

Cell C said its subscribers declined to 8.63 million, with an additional 5.1 million mobile virtual network operator (MVNO) subscribers.<\/p>\n\n\n\n

The company delivered revenue of R5.68 billion, which represented a year-on-year increase of 1.8%.<\/p>\n\n\n\n

Cell C said that this performance was commendable in the competitive South African telecommunications environment.<\/p>\n\n\n\n

However, Cell C had a problem. Its expenses have increased much faster than its revenue over the six months.<\/p>\n\n\n\n

Total expenses increased 16.7% year-on-year to R5.771 billion. This means the mobile operator’s cost of doing business is rising faster than its revenue.<\/p>\n\n\n\n

Operating expenses increased 52% year-on-year to R2.053 billion. The biggest factors driving this increase were personnel, IT, and marketing costs.<\/p>\n\n\n\n

Personnel costs were up 13% year-on-year, IT expenses increased by 27%, and advertising and marketing rose by 22%.<\/p>\n\n\n\n

There were also once-off costs, such as transaction costs of R233 million for the IPO and restructuring, and IFRS 2 costs of R140 million.<\/p>\n\n\n\n

“The increase in personnel costs was in line with the internal budget and driven by targeted investment in strategic organisational capacity,” Cell C said.<\/p>\n\n\n\n

“IT expenses were higher than the prior year, impacted by the non\u2011realisation of early\u2011payment vendor credit vouchers due to timing.”<\/p>\n\n\n\n

“The higher spend was primarily due to the concurrent operation of the legacy systems and newly implemented operating environments during the transition period.”<\/p>\n\n\n\n

Warning signs for investors<\/h2>\n\n\n\n
\"\"
Cell C CFO El Kope<\/figcaption><\/figure>\n\n\n\n

When expenses are growing much faster than revenue, it is often a warning sign for investors, as it can indicate the business may lose the ability to pay for itself.<\/p>\n\n\n\n

There are exceptions. When companies invest heavily in rapid future growth, for example, this trend is not concerning.<\/p>\n\n\n\n

However, Cell C does not fall into this category. It has suffered declining revenue for subscriber numbers for years.<\/p>\n\n\n\n

In Cell C’s case, it should address the situation to avoid profit margin compression and a return to recording consistent losses.<\/p>\n\n\n\n

It promised investors improved operating leverage \u2014 its ability to increase operating income by growing revenue while keeping costs relatively stable.<\/p>\n\n\n\n

However, the latest information raises concerns about negative leverage, where expenses grow faster than revenue.<\/p>\n\n\n\n

Simply put, Cell C is spending more to sign up and service subscribers than they did previously. This is often a sign of a broken business model.<\/p>\n\n\n\n

If a company isn’t profitable and its expenses are accelerating, it begins to burn cash. This can lead to increased debt, which previously brought Cell C to its knees.<\/p>\n\n\n\n

Cell C has informed investors that liquidity remained constrained, but that it continues to meet its obligations.<\/p>\n\n\n\n

It added that its African Bank facility has reduced to R1.4 billion from R1.9 billion, which means it is burning cash.<\/p>\n\n\n\n

To address this situation, Cell C will need to significantly cut its expenses and achieve a big increase in revenue.<\/p>\n\n\n\n

However, this is easier said than done. Cutting marketing and advertising spending, for example, will lead to slower subscriber growth.<\/p>\n\n\n\n

Cell C’s biggest challenge is growing its top line. Without revenue growth, the company risks a repeat of the death spiral it faced previously.<\/p>\n\n\n\n

The operator did say it was proactively pursuing cost containment through several strategic initiatives and operational adjustments.<\/p>\n\n\n\n

It is implementing a range of mitigation strategies to manage liquidity, which include cost optimisation initiatives and the deferral of non-essential capital projects.<\/p>\n\n\n\n

It also mentioned a disciplined approach to growth and scaling as a key component of its outlook.<\/p>\n","protected":false},"excerpt":{"rendered":"

Cell C’s expenses are growing much faster than its revenue, which does not bode well for the company’s future financial performance.<\/p>\n","protected":false},"author":23,"featured_media":613362,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[41906],"tags":[355,92781],"class_list":["post-629308","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-telecoms","tag-cell-c","tag-el-kope"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/629308"}],"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=629308"}],"version-history":[{"count":4,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/629308\/revisions"}],"predecessor-version":[{"id":629336,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/629308\/revisions\/629336"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/613362"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=629308"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=629308"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=629308"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}