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Cell C rejects bankruptcy claims

By Damaria Senne, ITWeb senior journalist
Johannesburg, 08 Aug 2007

Cell C has seen positive half-year results, rubbishing persistent rumours that it is on the verge of bankruptcy.

Yesterday, the third mobile operator released its interim financials, saying it's seen a gross profit growth of 23% as compared to the first half of 2006.

The operator also exceeded its earnings before interest, tax, depreciation and amortisation (EBITDA) targets, which grew 37%, to R346 million, says CEO Jeffrey Hedberg.

Total connections grew by 27% from 2006, to 3.4 million subscribers. Cell C's subscriber base is made up of 2.166 million pre-paid, 1.44 million post-paid subscribers and 110 000 community service telephone (CSTs) lines. Annual average revenue per user, including CSTs, increased to R152, from R151.

Cell C's network was expanded to a total of 2 171 base stations and it now carries 86% of the mobile operator's traffic.

"The 18% increase in overall revenue, from R3 billion in the previous reporting period, to R3.6 billion at the mid-year, was primarily attributed to the larger subscriber base, increases in airtime and access revenue, as well as a boost in interconnect revenue," the company says in a media statement.

Hedberg says the strong showing in the first half year is due to the company's turnaround strategy. "This is a good start and a long overdue achievement, proving that our new strategy is paying off and our focus on value for money and operational efficiency is improving margins while driving demand for our product offerings."

Doing well

The company's achievements have been slow in quelling media reports that it is failing. As late as last week, new sources emerged saying the company is on the verge of bankruptcy.

Hedberg says the reason rumours persist that Cell C is failing is likely because the company has not communicated its activities well to the market. Also, Cell C did not want to issue repeated denials without substance, he says.

The financial results from the first half of the year provide solid proof that the company is on track to turnaround and achieve its set targets, he adds.

Way forward

Hedberg says that, while his shareholders and management are happy with the company's performance to date, more work needs to be done. Cell C plans to double its revenue to over R13 billion, from 2006 to 2010, he says.

The mobile operator has also previously said it would double its subscriber base to about seven million within the same period. "We have a plan and set targets on that plan, but we'll always be a David fighting against a Goliath in the market," he says.

Hedberg is more satisfied with the role the Independent Communications Authority of SA (ICASA) is playing to provide an enabling environment for Cell C to compete.

"I feel more grit and determination coming out of ICASA, especially with regard to cost-based interconnection and in helping to define a basis of where CST should be rolled out," he says.

Related stories:
Cell C expects profitability soon
Cell C 'shake-up' is gentle stir
Prepaid churn hurts Cell C

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