Things are not looking all that good at Cell C insofar as finances are concerned so interim chief executive officer (CEO), Douglas Craigie Stevenson has published an open letter addressed to stakeholders.
Last month Standard & Poors Global Ratings downgraded Cell C’s debt rating to Selective Default (SD) from a CCC rating. This was as a result of Cell C’s weak liquidity position.
But the woes at Cell C have been ongoing since Stevenson took the reigns in March.
Since then, the leadership team has been hard at work on figuring out how to turn the network operator around and Stevenson has outlined a number of procedures it will be implementing.
For one, attorneys at Bowmans has been appointed to investigate parts of the business where there may be irregular business practices. PwC has also been hired to conduct a full procurement audit and review of Cell C’s business processes.
In addition to this, a full review of all contracts at Cell C is set to take place and there is currently a hiring freeze.
Naturally, employees at Cell C might be wondering whether they will still have a job for long. The interim CEO says that Cell C has engaged in discussion with all staff and the company’s union “in an open and transparent manner and adhering to all legal requirements”.
Employees are also said to have been informed of the direction and state of the business.
“We are also strengthening our board with independent non-executive directors in line with the King IV Code of Corporate Governance,” Stevenson said.
“I want to emphasise that Cell C is strategically positioning itself and we are using our best efforts to be a strong participant in the industry, I firmly believe we are on the right track,” the interim CEO concluded.
The full letter from Stevenson can be found below:
Dear valued stakeholder,
I was appointed in March 2019 as the interim CEO with the clear mandate from the Cell C Board to right-size and optimise the business. There was an acknowledgement that the company faces, and continues to face, financial and other challenges.
In an intensive 120-day period our new leadership team has a clear direction and have focused on ways to:
· Execute and implement a new business plan, aimed at simplifying the business model;
· Pursue a recapitalisation to optimise the capital structure;
· Extract greater value from our existing roaming agreement; and
· Optimise network revenue and usage.
The goal for Cell C is to become significantly better focused on operational performance, sound business ethics and accountability throughout the business.
Our efforts to improve the financial management of the business were enhanced in December 2018 with the board appointment of a new CFO, Zaf Mahomed, who has extensive business and finance experience. The financial results for Q2 2019 are showing some promising improvements to the bottom line, based on the measures taken since March 2019 to right-size the business. We have also appointed Deloitte as independent financial restructuring advisors to assist in optimising business processes. The company continues to face real challenges and we are in active discussions with our stakeholders with a view to achieving a secure financial position. In the interim, I can report the following:
1. We have implemented a wide range of initiatives across the business to improve and meet the requirements of the King IV Code of Corporate Governance, including driving greater transparency to the board. The executive directors have had positive engagements with all major stakeholders.
2. We have appointed attorneys Bowmans to investigate any parts of the business where we suspect that there may be irregular business practices and have also hired PwC to do a full procurement audit and review of our processes.
3. The new executive team, along with our new management committee is completely aligned with Cell C’s priorities and has committed to ensure changes that are necessary to deliver on the new business strategy.
4. We have implemented significant austerity measures and have cut costs which do not contribute to revenue generating activities, including a review of all contracts to ensure alignment with business priorities and a hiring freeze.
5. We have engaged in discussions with our staff and the company’s union in an open and
transparent manner and adhering to all legal requirements. To this end we have:
– Appointed a new HR Executive, Juba Mashaba, with strong human resources and industrial relations expertise and Juliet Mhango in the role of Human Capital Development and Transformation Executive;
– Focused on stabilising relationships with our labour force, and implemented a signed recognition agreement and formal engagement structures;
– Actively communicated with employees on the direction and state of the business;
– Re-emphasised that non-compliance with policies and procedures will not be tolerated;
– Taken meaningful steps to inculcate a transparent performance culture aligned with the business strategy;
– Cell C has a zero-tolerance policy towards illegal or unethical activity and have encouraged employees to use the independent whistle-blowers service to anonymously report irregularities or illegal activities.
We are also strengthening our board with independent non-executive directors in line with the King IV Code of Corporate Governance.
I want to emphasise that Cell C is strategically positioning itself and we are using our best efforts to be a strong participant in the industry, I firmly believe we are on the right track.