Cell C's network 60% migrated to roaming partners

Cell C is almost two-thirds of the way through its network migration strategy with 61% of its network migrated to partner towers.

The South African mobile operator said it had significantly increased its network footprint over the past 18 months through its "innovative network strategy" which involves not spending money on infrastructure and rather becoming a wholesale buyer of capacity and services by getting rid of its towers and permanently roaming on other networks.

As of the end of September 2022, it had access to 9,131 sites – up from 3,000 sites – with over 96.5% LTE-enabled, it said as part of a financial results update last week.

Six provinces in SA have been 100% migrated and it is still busy with migrations in the three most populous provinces with the Western Cape 88% complete; KwaZulu-Natal is 57% migrated and Gauteng is only at 33%. It said ambitions to be fully migrated by the end of 2023 were "on track."

Cell C's network migration progress as of September 2022.(Source: Cell C)

"We are systematically increasing our capacity and soon we will have 14,000 sites, enabling us to compete with the largest operators in the market," Cell C's new CFO, Lerato Pule, said in a statement.

Revenue regression

Cell C provided financial results for the year ended December 31, 2021, as well as the six months to June 30, 2022, which show that the operator is still struggling to get revenue back to growth.

During the 12 months from January to December 2021, revenue declined 5.1% year-on-year (YoY) to South African rand 13.4 billion (US$744 million). Meanwhile things improved a bit in the first six months of 2022 with revenue declining just 1.2% to R6.51 billion ($361.3 million), compared to R6.59 billion ($365.8 million) in the first six months of 2021.

"Economic conditions such as the impact of COVID-19 and the resultant economic slowdown, exacerbated by the persistent load shedding, impacted consumer and business confidence and ultimately consumer spending over the past 18 months," the telco said, adding that these factors translated into a decline in the revenue through churn, lower gross additions, lower average revenue per user (ARPU) and higher discounts provided to attract the desired customer base.

"In addition, the delays of the complex [recapitalization] process and the difficult adjustment period for Cell C, have to be considered when reviewing the company’s performance," it said.

The recapitalization, which was in the works for over three years, was finally concluded earlier this month with high hopes it will help stabilize the company by "deleveraging the balance sheet, providing liquidity to operate, and putting the company on a trajectory of growth and long-term sustainability," Cell C CEO Douglas Craigie Stevenson said at the time.

Prepaid potential

The bulk of Cell C's revenue continues to come from the prepaid segment, including prepaid broadband, with over 45% of total revenue coming from the prepaid customer base.

Overall ARPU for the first half of 2022 was 2.6% higher at R80.11 ($4.45) per user, but a bit down on the average spend of users across 2021 which was R81.69 ($4.53) per user.

"This was against the background of higher discounts granted to support the liquidity requirements during the year," the operators said.

Cell C's financial highlights.(Source: Cell C)

Earnings before interest and taxes (EBIT) for H1 2022 was declared at a loss of R1.09 billion ($61 million) compared to a profit of R667 million ($37.3 million) in the same period the previous year. This was mainly because of one-off costs relating to the recapitalization, audit adjustments and impairments, as well as forex losses on legacy foreign denominated debt which will not be repeated in future financial periods.

EBIT for the full year ended December 2021 had actually improved to R1.6 billion profit ($89.6 million), compared to the 2020 loss of R3.5 billion ($196 million).

"We are almost there – over the past 18 months we have actively focused on optimizing 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," Pule said.

Cell C's strategy evolution.(Source: Cell C)

Craigie Stevenson reiterated this saying Cell C was now focused on "the post-recapitalization period" which would see a sustainable business and a clear business strategy.

"We are geared and ready to be an agile player in the evolving telco landscape," he added.

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He said that in its next phase of growth Cell C has a number of new product offerings and partnerships in the pipeline.

The first partnership was already announced last week with South African bank, Capitec launching its mobile virtual network operator (MVNO) service, Capitec Connect, on the Cell C network.

"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," Craigie Stevenson concluded.

*Top image source: Image by pele green from Pixabay.

— Paula Gilbert, Editor, Connecting Africa