Media releases


Thursday, 29 September 2022

With a firm financial foundation in place, a new business model already operational and a clear path forward

  • Cell C's market update highlights the mobile operator's progress against its turnaround strategy and implementation of a new business model.
  • With a de-leveraged balance sheet, a capex light model and key assets to underpin its transformation journey, Cell C is investing in high value opportunities.
  • It has evolved its core business model while simultaneously building and scaling its operations with a number of initiatives to be delivered in the next few months.
  • It maintained a stable customer base over the past 18 months despite tough market and trading conditions.

Cell C released a market update today focusing on its future, post-recapitalisation, as a fit-for-purpose entity that will leverage its telco platform and evolve to be a digital lifestyle company.  It provided an update on its scalable and cost-efficient network strategy which commenced in 2021 and is on track to be concluded by the end of 2023. It also shared with the market its approach on new customer propositions and platform solutions post the recapitalisation process.

The recapitalisation, which was concluded earlier in the month, de-leveraged the operator's balance sheet and improved its overall liquidity position.

Cell C's CEO, Douglas Craigie Stevenson, says the focus over the past three years has been on implementing a turnaround strategy, introducing a new business model and managing the transition of our network. This is the backdrop of our drive to lay a firm financial foundation while simultaneously implementing significant operational changes. "

Cell C delivered on revenue and customer base, despite challenges

Economic conditions such as the impact of Covid-19 and the resultant economic slowdown, exacerbated by the persistent loadshedding, impacted consumer and business confidence and ultimately consumer spending over the past 18 months. The above factors translated into a decline in the revenue through churn, lower gross additions, lower Average Spend Per User and higher discounts provided to attract the desired customer base. In addition, the delays of the complex recap process and the difficult adjustment period for Cell C, have to be considered when reviewing the company's performance.

Despite these challenges, total revenue was stable for the first six months to June 2022 at R6,51-billion (H1 2021: R6,59-billion). When comparing revenue for the 12 months from January to December 2021 to the prior year there was a 5% decline to R13,4-billion (FY 2020: R14,13-billion). 
The bulk of revenue continues to come from the prepaid segment including prepaid broadband, which during H1 2022 contributed about 45% to total revenue at R2,96-billion (H1 2021: R3,03-billion) which is consistent with prior periods and its strategic intent.  For 2021, revenue from its prepaid customer base including prepaid broadband, contributed 47% to total revenue at R6,27-billion (FY 2020: R6,22-billion).  

Overall ARPU for H1 2022 was 2,6% higher at R80,11 (H1 2021: R78,07) and for the full year up to December 2021, overall ARPU was stable at R81,69 (FY 2020: R81,09). This was against the background of higher discounts granted to support the liquidity requirements during the year. 

Evolving business and the impact on EBITDA

During H1 2022, direct expenditure was at R4,7-billion which is 29% higher than the same period in 2021. This is mainly as a result of liquidity support and roaming costs, offset by some operational cost savings.  The impact was a lower gross margin of R1,77-billion (H1 2020: R2,93-billion) on a comparative six-month basis up to end June 2022. Direct expenditure for the full year 2021 was at R7,6-billion (FY 2020: R7,2-billion), 6% up on last year, while gross margin was lower at R5,74-billion (FY 2020: R6,91-billlion). Recapitalisation costs continued to negatively impact EBITDA in both reporting periods.

EBIT for H1 2022 was declared at a loss of R1, 09-billion (H1 2021: R667-million profit) mainly as a result of impairments during the first half of 2022 and as a result of audit adjustments and the business transition into the new operating model. Forex losses of R155,2-million which are mainly due to the legacy foreign denominated debt and once-off costs of R694,7-million for recap costs, liquidity support and conversion of finance to operating leases, are once-off costs, and will not be repeated in future financial periods as the business is now  fit for purpose.

EBIT for the year to end December 2021 improved to R1.6-billion profit, due to cost optimisation measures compared to 2020 loss of R3.5-billion, mainly driven by an impairment of R5.048-billion of network assets. Also included in the 2020 loss before tax is interest payable of R1.5-billion, and forex losses of R519-million, which will be significantly reduced post recapitalisation. The finance and forex losses in 2021 were R282-million higher mainly due to the frozen repayments on debt and exchange rate losses resulting from a weaker Rand. 

Lerato Pule, the new Chief Financial Officer of Cell C, says the interest charges and forex losses which have burdened Cell C over the past few years will be significantly lower, post recapitalisation, as the foreign debt will be reduced to nil and the once-off costs associated with the recap, will be taken in full in the 2022 financial year. "We are almost there – over the past 18 months we have actively focused on optimising our network operating expenses, finance leases, capex spend and roaming costs. We will be reinvesting in our billing and network systems. Our capex-light infrastructure model will ensure a sustained liquidity position for the business."

Network migration 60% completed 

Through its innovative network strategy,  Cell C has significantly increased its network footprint in the last 18 months. As at end of August 2022 it had access to 8 775 sites, up from 3 000 sites, with over 96,5% LTE enabled.  Six provinces have been 100% migrated and all that remains is the Western Cape, Kwa-Zulu Natal and Gauteng which are at 87%, 57% and 24% respectively.

"We are systematically increasing  our capacity and soon we will have 14 000 sites, enabling us to compete with the largest operators in the market," Pule added.

Going forward

Cell C's CEO, Douglas Craigie Stevenson concluded, "With a deleveraged balance sheet, a capex light model, our solid spectrum, a loyal and profitable customer base and a resilient brand to underpin our transformation journey, Cell C is well placed for the future."

"We are now focused on the post-recapitalisation period with Cell C as a sustainable business and a clear business strategy.

In this next phase of growth, we have a number of new product offerings and partnerships in the pipeline, Capitec being the first one announced earlier this week. We are geared and ready to be an agile player in the evolving telco landscape."

Back to media releases