Cell C is in severe financial trouble

According to a recent MyBroadband article, Cell C is in deep financial trouble, and was “forced to delay its debt payments and hire consultants to probe its business practices”.

Cell C’s interim CEO, Douglas Craigie Stevenson, wrote an open letter detailing the challenges faced by the company. The letter included a turnaround strategy, aimed at “extracting greater value from its roaming agreement and optimising its network revenue and usage”. A recapitalisation programme is also on the cards.

Bowmans Attorneys have been hired to “investigate any parts of the business where we suspect that there may be irregular business practices”.

A sharp decline in Cell C shareholder Blue Label Telecoms’ share price followed this announcement.

According to MyBroadband, they have “received information from industry insiders saying Cell C is facing tremendous financial challenges which are big enough to bankrupt the company”, with some speculating the company may “close down and have its parts sold off”.

According to Stevenson’s open letter, the challenges faced are the following:

  • Debt – this has gone up more than anticipated since the recapitalisation of 2017
  • The cost of debt – Cell C is paying a substantial premium on the cost of its debt
  • Liquidity problems – this is due to some of the events around the payment of large tranches on coupons
  • Poor business performance – Cell C’s business performance has not been optimal

Industry insiders told MyBroadband that Cell C is in this position because of:

  • High interconnect rates – the interconnect rate went from 20c to R1.25 before Cell C’s launch, which made it nearly impossible to compete
  • Bad management and shareholders – the company was not run efficiently enough to become successful
  • Declining voice revenues – as data products become more popular, high-margin voice traffic is declining
  • High roaming charges – Cell C pays high roaming charges in areas where it does not have network coverage

Image credit: Tech Central

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My Office News Ⓒ 2017 - Designed by A Collective


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