Africa’s Cell C turnaround strategy bearing fruit

Cell C’s turnaround strategy of focusing on more profitable customers is “bearing fruit” and the business is stabilising, the South African mobile operator said on Tuesday as it reported a wider annual net loss on impairments and one-off costs.

Cell C, in which telecoms firm Blue Label owns a 45% stake, is in the middle of a turnaround plan that involves recapitalising its operations to improve liquidity and its debt profile, and reworking its network strategy.

It is courting more profitable subscribers rather than pushing to increase the size of its user base after previous cut-price deals failed to attract regular, long-term users of its services.

“The foundations are now in place,” Cell C’s Chief Financial Officer Zaf Mahomed said.

Annualised average revenue per user (ARPU) from prepaid customers, its largest subscriber base, rose by 28% in the year ended Dec.31.

After shedding 15% of its prepaid subscriber base, however, total revenue was down by 8% versus the previous year.

On an annual basis the business removed more than 500 million rand ($34.99 million) worth of expenditure, and going forward it will realise savings of 171 million rand on wage costs after almost halving headcount to 1,340.

The country’s fourth biggest mobile operator reported a net loss before tax of 5.5 billion rand due to an impairment charge of 5.1 billion rand and one-off costs related to recapitalisation and network site restorations.

Excluding the impairment, the net loss after tax would have been 380 million rand, it said.

“We are starting to see the impact of our changes…and through the reduction in costs a shift to revenue generating activities,” Mahomed said.

To stay competitive and strengthen its balance sheet as it battles to service its debt, Cell C has taken a different approach than its larger rivals, planning to collaborate on infrastructure but compete on products and services under the Cell C brand.

The company has deactivated 1,500 network sites and decomissioned 1,298 as it moves its customers to bigger rivals Vodacom and MTN’s network, Cell C’s CEO Douglas Craigie Stevenson said. Reuters