Prepaid products cushioned Cell C’s performance in the last 18 months, the company declared today, saying the division contributed the lion’s share of its revenue.
The mobile operator provided a market update this afternoon, highlighting the progress of its turnaround strategy, as well as its financial performance in the past 18 months.
The much-anticipated market update was initially scheduled for 14 September, but had to be postponed indefinitely after CEO Douglas Craigie Stevenson fell ill.
In the update delivered today, Cell C said it significantly increased its network footprint across the country, with access to 9 131 sites, up from 3 000, with over 96.5% LTE-enabled.
Six provinces have been 100% migrated, with the Western Cape, KwaZulu-Natal and Gauteng at 88%, 57% and 33%, respectively, it noted.
It is systematically increasing its capacity and will soon have 14 000 sites, enabling the telco to compete with the largest operators in the market, it added.
Meal ticket
Cell C said notwithstanding the tough economic conditions, its total revenue remained stable, crediting the strong showing of its prepaid unit.
“The bulk of revenue continues to come from the prepaid segment, including prepaid broadband, which during the first half of 2022 contributed about 45% to total revenue at R2.96 billion (H1 2021: R3.03 billion), which is consistent with prior periods and its strategic intent.
“For 2021, revenue from the prepaid customer base, including prepaid broadband, contributed 47% to total revenue at R6.27 billion (FY 2020: R6.22 billion).”
The overall average revenue per unit for the first half of fiscal year 2022 was 2.6% higher at R80.11, in comparison with R78.07 in the previous corresponding period.
Cell C, which has been financially crippled for some time, today also celebrated the lifeline received last week, when its biggest shareholder, Blue Label Telecoms, sealed a funding deal.
The company says it is now focusing on its future, post-recapitalisation, as a fit-for-purpose entity that will leverage its telco platform and evolve to be a digital lifestyle company.
“With a deleveraged balance sheet, a capex-light model, our solid spectrum, a loyal and profitable customer base, and a resilient brand to underpin our transformation journey, Cell C is well-placed for the future,” commented Craigie Stevenson.
“We are now focused on the post-recapitalisation period with Cell C as a sustainable business and a clear business strategy.
“In this next phase of growth, we have a number of new product offerings and partnerships in the pipeline − Capitec being the first one announced earlier this week. We are geared and ready to be an agile player in the evolving telco landscape.”
Money matters
Turning to key financial metrics in the 18 months, Cell C’s earnings before interest and taxes (EBIT) for the first half of 2022 was declared at a loss of R1. 09 billion, compared to R667 million the previous corresponding period.
This, Cell C explained, was mainly as a result of impairments during the first half of 2022 and as a result of audit adjustments and the business transition into the new operating model.
“Forex losses of R155.2 million, which are mainly due to the legacy foreign denominated debt and once-off costs of R694.7 million for recap costs, liquidity support and conversion of finance to operating leases, are once-off costs, and will not be repeated in future financial periods as the business is now fit for purpose.”
EBIT for the year to end December 2021 improved to R1.6 billion profit, due to cost optimisation measures, compared to the 2020 loss of R3.5 billion, mainly driven by an impairment of R5.048 billion of network assets.
“Also included in the 2020 loss before tax is interest payable of R1.5 billion, and forex losses of R519 million, which will be significantly reduced post-recapitalisation. The finance and forex losses in 2021 were R282 million higher, mainly due to the frozen repayments on debt and exchange rate losses resulting from a weaker rand.”
The company said during the first half of 2022, direct expenditure was at R4.7 billion, which is 29% higher than the same period in 2021. This is as a result of liquidity support and roaming costs, offset by operational cost savings.
“The impact was a lower gross margin of R1.77 billion (H1 2020: R2.93 billion) on a comparative six-month basis up to end June 2022. Direct expenditure for the full year 2021 was at R7.6 billion (FY 2020: R7.2 billion), 6% up on last year, while gross margin was lower at R5.74 billion (FY 2020: R6.91 billion). Recapitalisation costs continued to negatively impact EBITDA in both reporting periods.”
Lerato Pule, new chief financial officer of Cell C, comments: “We are almost there – over the past 18 months we have actively focused on optimising our network operating expenses, finance leases, capex spend and roaming costs.
“We will be reinvesting in our billing and network systems. Our capex-light infrastructure model will ensure a sustained liquidity position for the business.”
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