Cell C seeks more network access from MTN in battle for growth

(Duncan Alfreds, Fin24)
(Duncan Alfreds, Fin24)

Cell C is in advanced talks with MTN [JSE:MTN] to gain more access to its network as South Africa’s third-biggest mobile-phone company strives to overcome mounting losses and add products such as financial services.

An extended roaming deal could be concluded within the next month, Chief Executive Officer Douglas Craigie Stevenson said in an interview. Cell C already has access to MTN’s network in major cities such as Johannesburg and Cape Town.

“We are not a tower-owning company, our profits have to come from the services that we are able to offer customers,” said the CEO, who took charge on a permanent basis last month to replace the ousted Jose Dos Santos.

Cell C is struggling under R9bn of debt, while full-year losses have ballooned to R8bn from R656m a year earlier. Its management team is in weekly calls with lenders to update them on plans and ensure the company pushes through a re-capitalization by the end of the year.

Liquidity Lifeline

A group of local banks have committed to provide temporary liquidity and extended the maturity of R1.2bn of debt that was due to be repaid last month, Cell C said in a presentation on Thursday.

South Africa’s telecommunications market is dominated by rivals MTN and Vodacom [JSE:VOD] meaning smaller rivals such as Cell C have struggled. The carrier has come close to collapse on previous occasions, and in 2016 was rescued by a funding plan led by Blue Label Telecoms. 

“It’s always been a stressed investment and a company that has not been performance-managed,” said Craigie Stevenson. “Deals were done to fix a funding gap, and did not have thought-out longevity.”

Other investments, such in TV-content platform Black, have absorbed cash without generating appropriate returns, the company said.

New management is examining all costs and looking to get the most out of Cell C’s assets, Chief Financial Officer Zafar Mohamed said in the same interview. The company wants the bad news out of the way so as to enable the start of a growth plan, he said.

Blue Label shares have slumped 47% this year, valuing the group at R2.7bn. 

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