Loss-making Cell C mulls asset sales
Troubled telco Cell C has reportedly put core parts of the business up for sale as it struggles with R8.2 billion of debt and deepening losses.
Citing people familiar with the matter, a Bloomberg report says Cell C’s fibre-optic network and base of billed customers are up for grabs.
The report adds the carrier is in talks to sell access to some of its wireless frequencies to larger rival MTN.
The fibre sale is said to have attracted interest from MTN, Vodacom and Telkom.
A Cell C spokeswoman is quoted as saying: “Cell C will look at any opportunity that will assist with the company’s long-term viability and sustainability. Any opportunity needs to undergo a due diligence process that takes into account all stakeholders.”
The latest developments at Cell C follow an exclusive report by ITWeb this week that the debt-burdened telco is being courted by China Mobile.
A source with knowledge of the matter told ITWeb negotiations are taking place between Cell C and China Mobile, and a deal is imminent.
Analysts have called for Cell C to seek recapitalisation or pursue consolidation, a suggestion dismissed by the company.
CEO Douglas Craigie Stevenson in a recent interview with ITWeb said Cell C was not considering a merger as an option to make it competitive and profitable.
However, the company this week said: “Cell C will keep the door open to any conversations that will assist the company’s future viability.”
The embattled telco’s net debt, excluding finance leases, has ballooned from R7.44 billion to R8.24 billion, which Cell C claims was driven by increased capital expenditure and working capital drawdown facilities.
Cell C recently reported a loss of R8 billion for the year ended May from a previous year loss of R656 million.
The company suffered major setbacks this year, receiving three downgrades by rating agency Standard & Poor’s over its debt.
In April, the agency lowered Cell C’s issuer credit rating to CCC- from CCC+, placing it deeper in trouble territory.
In June, the operator was once again downgraded after it renegotiated terms of its R1.4 billion debt, and in August, it received a downgrade for the third time for its debt profile.
A senior market analyst recently challenged Cell C’s largest shareholder, Blue Label Telecoms, to provide financial evidence that SA’s third largest mobile operator is solvent.
David Shapiro, deputy chairman of Sasfin Securities, said it’s disturbing that shareholders in the mobile operator had chosen silence instead of explaining the future of the company to the markets.
“Tell us what’s happening: is Cell C a going concern or not? If it is, how are you going to finance it? It’s worrying that there is no real news coming from shareholders. When you default to me, it implies you are insolvent,” he said.