Third mobile operator Cell C has slashed its debt ratio through a shareholder recapitalisation programme that will see its actual debt cut in half, to around R6.6 billion, from a total of over R13 billion.
Speaking at the company's financial presentation this morning, newly-appointed CEO Lars Reichelt surprised the industry by saying that, at the end of last year, shareholders converted their loans of R6.46 billion.
For years, the company has been swimming in a sea of debt that has left many of its innovations hamstrung. However, the new recapitalisation programmes will see its ratio to EBITDA decreased from 9.5 to 4.8.
Former CEO Jeffery Hedberg, now at Telkom in Nigeria, once noted that the only feasible way to save Cell C from completely drowning in debt was to get the shareholders to submit to an equity infusion.
Cell C is 75% owned by Saudi Oger, through Oger Telecom and Lanun Securities, and 25% owned by CellSAf, a black empowerment business.
The new ratio provides the company with much needed relief to tackle the telecoms market more aggressively, and will give it more room to take up cash from other institutions. With a financial reprieve in hand, the company says it plans to make a R5 billion investment this year in its network.
Network on the go
Plans to get a 4G data network into SA are well under way, with the operator signing two significant deals for the infrastructure. Earlier this year, Reichelt announced that Cell C had signed an agreement with Chinese business ZTE to roll out part of its new towers.
The second part of the deal has now been signed with Nokia Siemens Networks, which will provide the second half of the network.
“They are both implementing software-based radio management, which means the network is LTE-ready, if spectrum becomes available.”
Reichelt is not confident that spectrum will be available any time soon; but - in the meantime - the network will run with HSPA+. Cell C does not have a time frame for the completion of the network and the official release of a commercial product. “We will launch when we are sure we have meaningful coverage and good quality of service,” explained Reichelt.
Eating some cake
Despite it being one of the toughest years for the telecoms industry, Reichelt said Cell C is making progress. “All of us in the industry were hit with the three Rs: recession, RICA [service provider registration laws] and reduction,” he said.
Under Reichelt's leadership, the company is slowly growing its market share, from 13.4% of the market to 14.5%. At the end of last year, Cell C had 6.9 million customers.
Cell C increased revenue by 14%, from around R8.6 billion, to R9.9 billion. According to Reichelt, thanks to the decreasing prices of phones, the company also increased its services revenue by 17%. More significantly, it made significant strides in average revenue per user (ARPU) during the year, picking up 10% in the prepaid market and 14% in the Control Chat business.
ARPU on the operator's network, in the same period the year before, plunged by 20%.
Customer is king
Reichelt plans to hit the market as a new company, and is changing its face both financially and physically.
He has commissioned the development of a new Web site, which integrates with popular social networking platforms like Facebook and Twitter. More boldly, Cell C has decided to scrap its current billing and customer care services, and rebuild them from the ground up.
It has also started to modernise 100 of its consumer store fronts with a new look and feel. “We are taking a serious customer focus and you can get free coffee if you go in to get help,” he noted.
The company is also building a new customer care facility, which will be located in Parktown. “The facility will be state of the art. It is being built on green principles and will give us an opportunity for a fresh start.”
Reichelt says the changes at Cell C will boost its ability to reach more local customers and give the incumbents a run for their money.
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