Cell C alive and kicking

Johannesburg, 29 Jun 2007

Third mobile operator Cell C moved yesterday to quash rumours it may be taken over, telling journalists main shareholder Saudi Oger Telecom has suspended talks with unsolicited potential buyers.

Addressing the media during an informal briefing, in Johannesburg, CEO Jeffrey Hedberg insisted the company is "active, kicking and smiling", following recent media reports that Cell C is underperforming and in trouble.

This fire was fanned by last week's announcement by Moody's Investor Service that the company will default on an $805 million (R5.7 billion) debt within the next year, as it failed to generate enough cash to pay interest on the debt.

However, Hedberg denied claims the company was a loss-maker, saying it - in fact - exceeded performance expectations in the past five months. He also slammed the Moody's announcement, saying Cell C would pay R300 million towards servicing the loan within the next few days. A portion of the company's R500 million Nedbank loan will be used to pay the debt.

After a strong two years following its entry onto the local market, Hedberg admitted Cell C had gone through a slump. However, a new management team is turning the company around and it is performing better than expected, he noted.

Exploiting the regulator

He described Cell C as a matrix for foreign investment in SA, and said its performance was in line with that of a mobile operator entering a market dominated by two companies - Vodacom and MTN - which have had an eight-year head start.

He bemoaned the willingness of the dominant mobile players to take advantage of an under-resourced regulator, which poses problems for Cell C, and that Vodacom and MTN have not been stopped from increasing terminating rates. This, Hedberg said, limits Cell C's flexibility to set prices.

Meanwhile, unlike Vodacom and MTN, Cell C will not venture into the fixed-line arena. Hedberg wished them well and joked he hoped they lost focus within the mobile space.

Cell C, he explained, would continue making revenue off basic services, such as voice and SMS, with the cellular space. The popularity of its offerings, he said, is pushing the company to expand its capacity, which would accelerate its capital expenditure programme.