Another blow for Cell C, downgraded for poor debt profile

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Cell C CEO Douglas Craigie Stevenson.
Cell C CEO Douglas Craigie Stevenson.

SA's third largest mobile operator Cell C says its turnaround strategy is in progress, despite news that rating agency S&P Global downgrading the telco to “default” status after failing to make interest payments in July.

On Thursday, the rating agency said: “The downgrade follows Cell C's announcement on August 19 that it has failed to make approximately R194 million in interest payments due July 2019 on certain bilateral loan facilities totalling 40% of its total debt at December 31, 2018.”

Cell C responded swiftly saying: “The suspension of interest payments in July is part of the wider Cell C initiatives to improve liquidity and to restructure the company’s balance sheet. Cell C continues to work proactively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness as part of its strategic roadmap.”

The embattled telco explained that as announced earlier this month (7 August), Cell C had entered into a term sheet to expand the provisions of its roaming agreement with MTN, to better control its capital expenditure and operating costs.

“An agreement will lay the groundwork for a broader national roaming agreement, supporting South Africa’s policy goals of avoiding network duplication. The network services provided will drive efficiencies in the delivery of services to its consumers by Cell C.”

Cell C has been under pressure for some time, facing myriad of problems including job stoppages, declining revenues and debt management challenges.

In June, the operator was also downgraded by the global rating agency.

Standard & Poor downgraded Cell C’s debt rating further after the operator renegotiated terms of its R1.4 billion debt.

Yesterday’s downgrade is the third time the troubled operator has been downgraded by S&P for its debt profile.

In April, the agency lowered Cell C’s issuer credit rating to CCC- from CCC+, placing it deeper in trouble territory; now, it has been lowered further to 'SD' (selective default) from 'CCC-'.

Cell C's challenges have also not spared hit its largest shareholder, Blue Label Telecoms, knocking of R3 billion from the company’s stock at the Johannesburg Stock Exchange.

In a statement on Thursday, the newly appointed Cell C CEO, Douglas Craigie Stevenson said: “We are committed to simplifying the business model, right-sizing and optimising the business.  We have engaged with S&P throughout this process and believe we are on the right track with the transactions currently being finalised.”

It’s been 17 years since Cell C, signed up its first customer. The operator launched in November 2001, targeting 20% of the market share by 2006. This has failed to materialise.

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