Signs of hope for troubled telco
Publish date: 25 March 2020
Issue Number: 1823
Diary: Legalbrief eLaw
Reacting to Cell C’s annual results for the year ending December 2019, analysts say the management team led by CEO Douglas Craigie Stevenson performed well under the circumstances. SA’s third-largest operator has been bleeding cash for several months and has failed to compete meaningfully against Vodacom and MTN which have superior network infrastructure and deeper pockets for sizeable capex investments. ITWeb reports that Cell C’s debt has ballooned from R7.44bn to R8.24bn, which the company says was driven by increased capital expenditure and working capital drawdown facilities. Cell C results on Monday showed that in the six months to 31 December 2019, it had a strong showing with a R1bn improvement in earnings before interest, tax, depreciation and amortisation (EBITDA). Compared to the first half, Cell C said gross margin improved by 9%, operating expenses declined by 18% and EBITDA more than doubled to R1.7bn.
Stevenson said 'the green shoots of the turnaround strategy, which was implemented from March 2019 onwards, are now visible'. Tech Central reports that the company said the turnaround strategy was focused on operational efficiencies, including cutting costs that do not translate into revenue-generating opportunities, minimising operating expenses and optimising traffic. A second pillar is a network strategy, which is an evolution of the capex-intensive, high-fixed cost infrastructure-based network to a variable cost opex model. The third is an improvement in liquidity and a new capital structure through a recapitalisation. 'Operationally, the business is stronger, and a successful recapitalisation will secure the long-term sustainability of Cell C,' Stevenson added.