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Cell C ‘largely out of debt’ after recap, says CEO

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 29 Aug 2023
Creating a customer-centric way of doing business is a large part of Cell C’s renewed growth strategy.
Creating a customer-centric way of doing business is a large part of Cell C’s renewed growth strategy.

Cell C CEO Jorge Mendes is working to bring the financially-constrained mobile operator back to profitability within 18 to 24 months, as it charts a path to a better future.

The telco is creating a new growth strategy, as it looks to increase its market share in a tightly-contested market dominated by MTN and Vodacom.

During an interview with ITWeb at Cell C’s headquarters in Johannesburg yesterday, Mendes revealed plans to turn the debt-laden company’s fortunes around.

Mendes, who joined the firm in June, faces an uphill battle in managing the financially-constrained mobile operator, amid a difficult operating environment.

“I think in 18 to 24 months, it will be a different organisation. We should carve out a space where the valuation is significant and different from where it is today.

“We have a plan of becoming profitable and are busy crafting our new strategy as we speak. I would say we probably need a minimum of 15% or so revenue market share to deliver on that goal. That would be a really solid position to be in.”

In its financial results for the six months ended November, biggest shareholder Blue Label Telecoms disclosed the value-in-use of its stake in Cell C as at 30 November 2022 equated to R1.5 billion.

Cell C in September completed a lengthy cash-raising exercise led by Blue Label Telecoms, in an effort to recapitalise the business.

The transaction included restructuring of Cell C’s debt owed to certain secured lenders totalling R7.3 billion (fixed as at November 2019). As part of the agreement, Blue Label would provide liquidity via a secured loan of R1.46 billion.

A portion of R1.03 billion of this debt funding would be used to pay out the secured lenders, as per the accepted compromise offer of 20c for every R1 of debt, it said at the time.

Mendes declined to comment on how much debt the operator currently has. However, he tells ITWeb the financial relief extended to Cell C has seen new money flow into the business to address its financial and operational liabilities.

“Obviously, we would like to return to growth and profitability – that is key. We are not an NGO, so we need to ensure we create some stakeholder value, which we have not done in the past.

“There is off-balance-sheet debt, and our vision is to become a sustainable business and we are not far from that. The business has been recapped twice, if I'm correct, so there has been a lot of off-balance-sheet activity.

“It’s no secret that it's been in distress, but we are largely out of debt and we still have to trade ourselves into a sustainable position,” he adds.

Cell C CEO Jorge Mendes.
Cell C CEO Jorge Mendes.

Cell C has strong rivals in the market, and has been transitioning into a digital lifestyle company, as it tries to remain competitive.

Creating a customer-centric way of doing business is a large part of Cell C’s renewed growth strategy, Mendes adds.

Cutting costs is another important element, which is why it has reduced its headcount over the last few months. “During the recap process, we have had to cut our costs and we trimmed our staff by, I think, 3 500, and that's been trimmed significantly.

“We are repositioning, carving out a nice opportunity and simply put – it is one of customer-centricity. Let's be honest, as the telecoms industry, we don't get the basics of customer service right. So, we think we have an opportunity to do it slightly differently and make sure all of our decisions have got the customer at the centre of our decision-making process.”

As part of the renewed strategy, Mendes points out the telco is looking to strengthen its mobile virtual network operator partnership deals, and introduce “exciting” offerings across several verticals, including prepaid and postpaid products, data packages and fibre.

He states the telco is in the process of signing a new postpaid roaming agreement with Vodacom, and a new prepaid roaming agreement with MTN. “We have a roaming agreement with MTN that is busy changing at the moment, and Vodacom as well, and that will put us in a really strong position going forward.”

Mendes points out the company has no immediate plans to play in the consumer 5G space.

“Investment in 5G is difficult to monetise from a consumer perspective, but there are pockets of opportunities in enterprise 5G.

“Of course, carrying traffic on 5G will prove to be very efficient and we will play in the 5G space in terms of traffic being carried on 5G networks, but this will be structured in the roaming agreements,” he concludes.