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. 

ZAR/USD
17.63
(-0.04)
ZAR/GBP
23.01
(-0.05)
ZAR/EUR
20.79
(-0.01)
ZAR/AUD
12.62
(-0.03)
ZAR/JPY
0.17
(-0.01)
Gold
2034.21
(+0.05)
Silver
28.28
(+0.09)
Platinum
961.50
(+0.38)
Brent Crude
44.55
(-1.53)
Palladium
2166.01
(+0.63)
All Share
56757.73
(-1.56)
Top 40
52435.65
(-1.72)
Financial 15
9897.96
(+0.10)
Industrial 25
74671.49
(-1.98)
Resource 10
58948.78
(-1.89)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 930 votes
It depends on how the funds are used.
74% - 6245 votes
No. We should have gotten the loan elsewhere.
15% - 1284 votes
Vote