Cell C CEO explains why it defaulted on R2.69 billion loan

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This morning, Cell C’s chief executive officer, Douglas Craigie Stevenson (pictured) provided some information regarding the turnaround at the embattled mobile network operator.

Last week it was revealed that Cell C had defaulted on a loan of R2.69 billion as it pushes to improve liquidity, its debt profile and the firm’s overall long-term competitiveness.

Now Craigie Stevenson has provided some clarity on the turnaround process and its plans moving forward.

Perhaps most importantly, Craigie Stevenson outlined why it defaulted on a loan by explaining that there is an “informal debt standstill and debt payments have been suspended” and that lenders are well aware of this fact.

“Although Cell C’s lenders are entitled to call up the entire debt owed, they have not accelerated debt payments and have held off on taking enforcement action in order to facilitate a commercial solution. The non-payment is not a surprise to lenders that understand the Cell C turnaround strategy,” said Craigie Stevenson.

In addition to freezing debt repayments, the CEO outlined some of the steps Cell C has already taken to turn the ship around.

These steps include:

  • A cost efficiency programme across all expense lines in the organisation – the run rate was over R864 million at the time of the interim results (September 2019), the additional savings will be reflected in the upcoming results.
  • Rebalancing traffic and retail products – Cell C removed non-profitable products and increased its focus on retail product pricing and wholesale pricing.
  • Shifting service revenue back to growth – this will be achieved through a more focused approach on profitable products and re-energising distribution channels.
  • A new leadership team with the key appointments of a new CEO, CFO, Chief HR Officer and Chief Legal Officer.
  • Appointment of non-executive, independent directors to the Board to bolster governance, improve diversity and transformation.
  • A hiring freeze.
  • Progress in stabilising labour relations.

If you’re filled with confidence after reading that you aren’t alone. Cell C says that there is significant investor interest in the business thanks to the firm’s 16 million subscribers.

These developments in the turnaround strategy are also rather encouraging.

Where ever we may roam

Of course Cell C is not out of the woods yet and maintaining a mobile network from an infrastructure point of view can get costly quickly.

The mobile network operator received a slice of good news in November 2019 when it signed an extended roaming agreement with MTN.

This, says Craigie Stevenson, “will enable the company to manage its network capacity requirements in a more scalable and cost-efficient manner. This will also provide access to current and future technologies.”

The CEO added that progress is also being made as regards recapitalisation but that is – as you may imagine – a delicate process.

“The focused company strategy and correctly capitalised balance sheet will lead to better leveraging of assets. The South African mobile market is in a mature phase and the long-term growth of the industry in general, and players such as Cell C in particular, will be determined by the ability to deliver innovative service offerings while assessing over-investment in capital hungry infrastructure,” said the CEO.

“There is belief in Cell C’s long-term prosperity, and the new leadership team is focused on the journey to turn the company into a profitable, innovative player in the local telecoms industry and is confident the organisation is fully geared to overcome its challenges. Earnings are up, margins are stabilising and there is a ruthless approach to cutting additional costs out of the business. A recharged Cell C is being built that creates value for its stakeholders,” concluded Craigie Stevenson.

While we’re not brimming with confidence in Cell C just yet, it does appear as if the firm is working hard to turn the ship around and from what we can see given this statement, it’s working.

Of course time will tell whether Cell C is successful in its pursuits but things are certainly looking good so far.

Brendyn Lotz

Brendyn Lotz

Brendyn Lotz writes news, reviews, and opinion pieces for Hypertext. His interests include SMEs, innovation on the African continent, cybersecurity, blockchain, games, geek culture and YouTube.


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