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Cell C to close down 130 stores as financial pressure mounts

Read time 3min 40sec

A jobs bloodbath is expected at debt-saddled mobile operator Cell C, after it announced it is closing down 130 stores across the country as financial pressure continues to ravage the company.

The telco says it is reviewing its operating model and organisational structure to address inefficiencies. Cell C has since initiated a Section 189 process, advising staff of the possibility of redundancy of certain positions and possible retrenchments.

This week, Cell C circulated the list of the 130 soon-to-be-shuttered stores spread across the country to its senior managers, as it embarks on the sell-off project.

Cell C has consistently been under-performing for some time, generating significant losses of R33 billion over the years.

The company implemented a turnaround strategy in March 2019, which has now been extended to the retail space.

“Based on the changed retail environment that has been fast-tracked by the impact of COVID-19, evolving consumer purchasing habits and the poor financial performance of a number of stores, the scope of restructuring has been expanded to its retail outlets,” says Cell C.

“Part of the turnaround strategy includes Cell C evolving its business strategy and operating model in order to run a more efficient and competitive business that is aligned to customer needs and behaviours.”

Moreover, Cell C says it is embracing digital solutions and “driving digital inclusion by leveraging collaborations and partnerships, and moving closer to our vision to be customer champions with innovative service offerings”.

The majority union at Cell C, the Information Communication Technology Union (ICTU), says it has been caught by surprise by the news. ICTU is already battling the company, demanding it withdraws retrenchment notices served to employees in June.

ICTU media officer Thabang Mothelo tells ITWeb: “The union was not made aware. We have received through the grapevine [news] that 128 stores were identified.”

“Not all 128 are badly performing, but key to bad performance is that the stores were opened without a proper business case to opening them. Some of the stores were opened in the past two years.”

Mothelo lays into CEO Douglas Craigie Stevenson, saying he was part of the leadership that approved the opening of stores that “are badly performing”.

“Employees in stores have been complaining about the lack of iPhone products (inclusive of ear pods, MacBooks, chargers) in stores. This proves that their bad performance was premeditated,” he says.

Today, a group of Cell C employees were demonstrating at its headquarters.
Today, a group of Cell C employees were demonstrating at its headquarters.

At the time of publishing, a group of Cell C employees were demonstrating at the company’s headquarters.

Cell C is struggling and has been facing operational and liquidity constraints. The company has been facing a bleak future because of its debt woes as well as lack of capital.

Earlier this month, Cell C announced it had once again failed to pay its debts, telling the markets that it will continue to work proactively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness.

Cell C’s biggest shareholder, Blue Label, notified the markets that Cell C had again defaulted on the payment of capital on its $184 million note which was due on 2 August.

This was the second time since December the company missed interest payment on the same amount, as well as capital plus interest payments on loan facilities with Nedbank, China Development Bank Corporation, Development Bank of Southern Africa and Industrial and Commercial Bank of China.

Cell C employees demonstrating about the imminent job cuts.
Cell C employees demonstrating about the imminent job cuts.

Despite the mounting financial pressure, Cell C remains hopeful for the future. It says there is good progress in a complex recapitalisation programme.

“Discussions to seek alignment among all stakeholders are being held and term sheets will need to be concluded,” it says.

In May, the Competition Commission recommended conditional approval of the proposed acquisition of certain Cell C assets by special purpose vehicle Gatsby SPV.

Gatsby is a ring-fenced newly incorporated special purpose vehicle which was incorporated for the sole purpose of entering into the proposed transaction.

The Gatsby SPV transaction is the latest potential lifeline for the troubled company after rebuffing Telkom’s offer last year.

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