Cell C's turnaround proves profitable

Johannesburg, 16 Apr 2008

SA's third cellular operator Cell C extols the turnaround strategy implemented by CEO Jeffrey Hedberg, as it declares an operating profit of R321 million for 2007.

This is a R670 million about-turn from its R349 million operating loss in 2006.

Presenting its financial results to media yesterday, the operator explained it entered the 2007 financial year with a "focused, differentiated strategy". Prior to this, it had no clear corporate strategy, tried to be "everything to everyone", and its offerings and position were not sufficiently differentiated for a third entrant.

The company's 2007 five-point plan focused on leadership and organisation, legal and regulatory initiatives, channel efficiency, community service telephones, and prepaid churn.

Hedberg commented: "I'm happy with our performance on all these points, except perhaps for prepaid churn. Once we get our customers past the four-month mark, then churn reduces considerably. But we still have a lot of work to get it to a level at which I am satisfied."

Money matters

The implementation of Hedberg's turnaround strategy has seen Cell C deliver significant improvements in its 2007 financial results.

Revenue increased 17%, to R7.5 billion; earnings before income tax, depreciation and amortisation climbed 236%, to R1 billion; and cash flow improved 133%, to R841 million. In the year, the company reported an addition of four million subscribers. At the end of the year, it had 4.8 million active subscribers. Virgin Mobile's subscribers are not included in these numbers.

According to CFO Fabrizio Mambrini, Cell C's introduction of the Hola 7 and Woza offerings were key drivers behind this performance.

"Our Hola 7 offering is endorsed by well-known personality Zola; this has done a lot for our impression in the market. Our customers see Zola as 'cool'; by association our offering becomes 'cool' too."

He adds: "As for Woza, our decision to push spare network capacity back to our customers - rather than try and profit from it - has been extraordinarily successful. It has got people to try our offerings, experience our value and see the affordability that comes with being on Cell C. It's also an offering which we know our competitors don't have the capacity to offer, so it is definitely a differentiator."

Hedberg would not comment on majority shareholder Oger Telecom's desire to acquire a stake in SA fixed-line operator Telkom. However, he said such a deal would be good for Cell C, as it would give the company scale.