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Cell C has published its interim results for the six months ended June 2020, reflecting a net loss of R7.5 billion after tax.
The company said that this loss was mainly due to one-time costs and adjustments, and also reflects impairment of R5 billion.
Cell C’s network and R5 billion worth of right-of-use assets were affected by the new MTN network arrangement.
The company’s reported EBITDA is lower than the same period last year at R1.2 billion, and EBIT was declared at a loss of R.53 billion compared to a profit of R90 million in the first half of 2019 .
Cell C said that excluding one-time recapitalization and restructuring costs, EBIT for the first half of 2020 would have been R162 million, an improvement of 80%.
“We remain focused on restructuring the balance sheet and optimizing the business for long-term competitiveness,” said Cell C CFO Zaf Mahomed.
“We have a legacy debt challenge on our balance sheet, rather than an income statement, one that will be addressed with recapitalization.”
Cell C CEO Douglas Craigie Stevenson said the company is on track regarding its restructuring plan.
He said he expects operating margins to improve in the medium term as Cell C transitions to its new business model.
Subscriber revenue and decline
Cell C’s prepaid subscriber base declined 34.6% over the past 12 months, which the company said was in line with management’s strategy to rationalize its customer base.
“This translated into just a 9.9% decrease in prepaid revenue, while gross margin grew 11.5% and prepaid ARPU increased 26.9%,” he said. Cell C.
“The streamlining process resulted in an overall improvement in the customer base and an additional 4.8% increase in prepaid ARPU from the end of June 2020.”
Overall revenue was R6.9 billion, and more than 89% of its revenue came from service revenue, which was 6% lower at R6.5 billion, while hybrids and fiber to the home saw an increase in sales of 16.7% and 11.1% respectively.
Cell C added that the wholesale business revenue reflected a 7% decrease due to an exit from the wholesale deals that diluted margins and congested the network, but the MVNO portion generated an 18% increase to R398 million.
Craigie Stevenson said Cell C’s recovery strategy is based on four pillars: improvements in operating efficiency, restructuring its balance sheet, implementing an innovative network strategy and improving its overall liquidity.
“This set of results highlights that our operational approach is in line with our effort to reposition cell C for long-term success,” he said.
“To remain competitive, Cell C had to take a different approach to our big rivals who are all heavily invested in capital-hungry infrastructure: three operators with large-scale infrastructure just don’t make financial sense.”
“Our vision is to be the largest aggregator of wholesale capacity and customer of infrastructure providers. We will collaborate on infrastructure but compete on products and services, ”added Craigie Stevenson.
He said the 4G roaming deal with MTN is the first step in cost synergies and brings tangible benefits to network customers.
Despite the significant net loss after tax, Cell C stated that its turnaround strategy is paying off, shown in the infographic below.
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