Oger Telecom, Cell C's majority shareholder, has earmarked an equity investment of $350 million - about R3.5 billion - in Cell C.
The equity investment of $350 million for 2013 is in addition to the $200 million equity invested in 2012 and a further significant investment scheduled for 2014, says Cell C. In addition to the shareholder injection, key lenders, including Nedbank and the Development Bank of Southern Africa, have just concluded a long-term financing package of R2.2 billion, in a transaction arranged by Nedbank.
The combined funding of equity and loans will provide the company with a sizeable pool of liquidity to continue investing in its network quality, customer base and product offerings. In addition, the funding structure ensures the company maintains an appropriate capital structure and balance sheet to sustain its drive to offer compelling tariffs and services to its customers.
CEO Alan Knott-Craig says its shareholders have indicated they are willing to inject more equity next year if a review of the sector leads to a more competitive industry where smaller players like Cell C can remain sustainable.
Positive news
In a statement released by the cellphone operator, it says the investment follows the Independent Communications Authority of SA's (ICASA's) announcement in June that it will conduct a market review of the remedies under the Call Termination Regulations and other programmes aimed at addressing the high cost to communicate in SA.
"Under the leadership of Alan Knott-Craig, Cell C has gone from strength to strength. The company has a solid business strategy and we are confident that the regulator will make decisions that give smaller players a better chance of being sustainable competitors. It is on this basis that we as shareholders are fully committed to the company and the country," says Cell C and Ogar chairman Mohammed Hariri.
Cell C says it has been growing market share and now has more than 11.5 million customers. It says it has done this through being competitive, acquiring market share from its competitors, and reducing mobile tariffs to its customers.
"ICASA's decision to conduct a market review of the remedies under the Call Termination Regulations has bolstered our shareholders' confidence in the future of Cell C and the industry. The equity injection also strengthens our balance sheet.
"But Cell C needs aggressive and proactive regulatory support to continue its drive to reduce the cost to communicate in SA and remain sustainable in the process," says Knott-Craig.
ICASA will review call termination rates under its holistic look at the telecommunications industry under its Cost to Communicate Programme. Cell C sees this as a positive move and says there are a number of possible remedies, of which the most important are aggressive and sustained asymmetry, mandatory flat rates and lower mobile termination rates for operators with significant market power.
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