While we’re aware that things aren’t all sunshine and poppies at Cell C, the firm’s latest financial results make for grim reading.
Released this morning, Cell C has declared a net loss, after tax, of R8.03 billion. That’s a sizeable increase from the R656 million in net losses the firm reported a year ago.
The bulk of that loss includes impairments to the value of R6.275 billion.
“We performed an annual impairment test on the carrying value of the property, plant, equipment and intangible assets (Cash generating unit ‘CGU’) during the 31 May 2019 period. The impairment was calculated at the higher of fair value less cost to sell or the value in use. The impairments assumptions were made on the cash flows which were limited to the generation of cash by the CGU with no regard to new technology, expansionary growth or the pending recapitalisation transaction,” Cell C wrote in a statement sent to Hypertext.
There were however some highlights in the results.
While total revenue climbed one percent year-on-year to R15.4 billion, that growth was offset by declines in Cell C’s prepaid market.
Prepaid revenue fell one percent while the prepaid customer base fell four percent. The revenue was propped up by six percent growth in Cell C’s contract segment, 20 percent growth in its broadband division and 14 percent growth in its wholesale division.
Despite a two percent dip in total subscribers, Cell C says that average revenue per user increased by 11 percent.
Of course, Cell C needs to turn this ship around and as such it outlined four strategies it will implement to cut costs.
These strategies are already underway and Cell C has told us what those look like.
- Reviewing the channel options for the ‘black’ streaming service – which will ensure a saving of R120-million annually with additional savings expected as Cell C continues to right-size this business unit;
- Rebalancing its traffic and retail products – Cell C removed non-profitable products and increased its focus on retail product pricing and wholesale pricing;
- Implementing a cost efficiency programme across all expense lines in the organisation – the current run rate of over R864-million, with more anticipated will result in these savings reflected in future results;
- Shifting service revenue back to growth – this will be achieved through a more focused approach on profitable products and re-energising its distribution channels.
“Our turnaround strategy is focused on ensuring operational efficiencies, restructuring our balance sheet, implementing a revised network strategy and improving our overall liquidity. Cell C has a real opportunity to address its historical performance through a focus on operations that will restore shareholder value. We are convinced that our wide-ranging operational initiatives will position Cell C for long-term success,” said Cell C chief executive officer Douglas Craigie Stevenson.
The earnings call also reveals that Cell C believes that building out network capacity is something of a lost cause. As such the firm will be negotiating for an extended roaming agreement.
“Networks will be a utility in the future with one or two mobile infrastructure providers per country and it does not make economic sense to overbuild on basic infrastructure. Against this background, we are in negotiations for an extended roaming agreement which will enable Cell C to manage its network capacity requirements in a more scalable and cost-efficient manner. This will also provide access to current and future technologies,” wrote Cell C.
In conclusion Stevenson said that the firm is executing its turnaround strategy and that doing so will improve its financial profile and streamline the business.
The management team is said to be focused on turning Cell C into a profitable, innovative player in the sector.
“The last three months have already showed early signs of recovery – our earnings are up, our margins are stabilising and there is a strong focus on ruthlessly cutting additional costs out of the business. We are leading the way in building a recharged Cell C that creates value for its stakeholders,” Stevenson concluded.