South Africa’s Cell C ekes out profit with turnaround plan

South Africa’s fourth-biggest mobile operator Cell C said it made a first-half profit of $10 million on Wednesday, recovering from a $513 million loss a year earlier, as a turnaround strategy bore fruit.

Cell C, in which Blue Label Telecoms owns a 45% stake, reported a 148 million rand ($10 million) profit before tax in the six months to the end of June, from a loss of 7.6 billion rand in the same period of 2020.

As part of the strategy, Cell C is sourcing new loans with easier funding terms to replace existing debt.

“A recapitalisation is the final pillar in Cell C’s turnaround strategy and will provide momentum to effectively manage the transition, focus on profitable revenue growth and the overall simplification of the cost base,” it said.

Cell C’s turnaround plan also involved decommissioning its network sites and migrating customers to roam on rival MTN and Vodacom, giving them access to broadband and high-speed 4G connections.

It buys infrastructure services from MTN and pays roaming fees to Vodacom for their network access but also competes with them by attracting more profitable customers through specialised products such as data bundles.

This has saved the company from spending billions to set up and maintain towers and fibre networks.

Its turnaround steps have helped sustain average revenue per user (ARPU) at 66 rand year-on-year while raising the prepaid customer base by 15% to 9.6 million, CEO Craigie Stevenson said.

“The last two set of results have given a clear indication that the current management team has a clear strategy in place and is effectively transforming the commercial and operating expense/margin structure of the business into a far more sustainable and profitable entity,” analysts Ziyad Joosub and Preshendran Odayarthey from Nedbank said via email. Reuters