Cell C’s Turnaround Strategy is Slowly Paying Off

Cell C released its annual results for the year ending December 2019. The latest set of results show how the turnaround strategy has delivered improved operational efficiencies with the positive impact of these changes flowing through during the latter six months of 2019.

Comparing the first six months to the last six months of 2019, gross profit increased by 9% and EBITDA more than doubled to R1,7-billion. Excluding impairments, the mobile operator made a profit of R705-million, before interest and tax, in the last six months of 2019.

Cell C’s CEO, Douglas Craigie Stevenson says the green shoots of the turnaround strategy, which was implemented from March 2019 onwards, are now visible.

The turnaround strategy was focused on operational efficiencies, including cutting costs that do not translate into revenue-generating opportunities, minimizing operating expenses and optimizing traffic.

“Operationally the business is stronger and a successful recapitalisation will secure the long-term sustainability of Cell C,” adds Stevenson.

Financial and operating performance specifics 

• Revenue for the full annual period up to December 2019, remained steady at R15,2-billion in comparison to R15,67-billion in 2018
• Service revenue, which contributes 94% to overall revenue, dropped by 1%
• Mobile and wholesale revenue was up by 4% and 17% respectively
• Gross operating income was 9% up at R3,8 billion in H2 of 2019 in comparison to R3,5 billion in H1 2019
• Operating expenses was 18% lower when comparing H1 of 2019 with H2 of the same year

“Although there was a decrease of 2,9m prepaid customers – a 21% drop – in the 12 months to 2019, the margin on our existing customers is better as a result of acquiring profitable customers and not signing on a customer at any cost. Revenue from equipment sales, on a year-on-year basis, was 27% down as we moved away from subsidising customers at all costs. This enabled us to build a quality customer base with better margins and quality of service,” says Zaf Mahomed, Cell C’s CFO.

The Future of Cell C

Commenting on the future, Stevenson says that Cell C is now an operationally sound business that is financially viable and competitive. “The business performance allows for a successful recapitalisation to take place with a sustainable debt profile. We are optimistic that the hard work of fixing the operations prepares us to conclude the recapitalisation and to continue to be a customer champion delivering innovative service offerings.”