Latest Cell C financials make for grim reading

There is no doubt that the pandemic and associated lockdown has been difficult for some businesses.

With the sudden reliance on internet connectivity that lockdown inspired, one would think that those providing connectivity would flourish during the pandemic but that’s not the case will Cell C.

The mobile network operator released its interim results for the six months ending June 2020 and it has declared a net loss after tax of R7.5 billion. For comparison, during the same period in 2019, Cell C posted a net loss of R875 million.

While Cell C  says that this loss contains impairments amounting to R5 billion due to the new MTN network arrangement, that’s still a net loss of R2.5 billion, nearly R1.5 billion more than the loss posted a year earlier.

In worse news, revenue fell from R7.4 billion in 2019 to R6.9 billion in 2020.

The reason for this decline, according to Cell C, is that service revenue was six percent lower at R6.5 billion. The one slice of good news is that revenue from hybrid and Fibre-to-the-home sales saw a 16.7 percent and 11.1 percent increase respectively.

While these numbers are grim, Cell C’s chief executive officer, Douglas Craigie Stevenson says that this is part of the firm’s turnaround strategy.

“To stay competitive, Cell C had to take a different approach against our large rivals who are all heavily invested in capital-hungry infrastructure – three operators with large scale infrastructure simply doesn’t make financial sense,” said Craigie Stevenson.

“Our vision is to be the biggest aggregator of wholesale capacity and customer to the infrastructure providers. We will collaborate on infrastructure but compete on products and services. The 4G roaming agreement with MTN is the first step in cost synergies and bringing tangible benefits to our customers,” the CEO added.

On that note, Cell C’s wholesale business reflected a seven percent decline due to an exit from wholesale agreements which “diluted margins and congested the network”. Whether the exit from these agreements will prove fruitful in future remains to be seen.

The one shining ray of hope for Cell C however is that excluding recapitialisation and restructuring costs, earnings before interest, taxes, depreciation, and amortisation improved 80 percent to R162 million in the six months ending June 2020.

This does bode well for the future of Cell C but the firm is really going to have to show investors that the oft cited turnaround strategy is starting to work and that the firm can indeed come out at the other end smelling like daisies.


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