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Zaf Mahomed, Chief Financial Officer of Cell C
Cell C mobile operator has reported an interim net loss after tax for the six months to June 2020 of R7.6 billion, but said that this was mainly the result of one-time costs and adjustments and that normalized earnings actually grew by 64% to R1.8- billion.
The net loss after tax includes impairments of R5 billion, Cell C said on Tuesday. The net loss after tax in the same period of 2019 was R875 million.
Revenues reached R6.9 billion compared to R7.4 billion a year ago. More than 89% of its revenue came from service revenue, which was 6% lower at R6.5 billion, while fiber-to-the-home and hybrid services saw sales increase of 16.7% and 11.1%. % respectively.
And, although the wholesale business revenue showed a 7% decrease due to an “exit from the wholesale agreements that diluted margins and congested the network”, the mobile virtual network operator’s portion generated an 18% increase to R398 million. . MVNO customers include companies like First National Bank and Virgin Mobile.
“In line with management’s strategy to streamline its subscriber customer base while retaining profitable customers, the prepaid subscriber base decreased 34.6% over a 12-month period. This translated into just a 9.9% decrease in prepaid revenue, while gross margin grew 11.5% and average prepaid revenue per user (ARPU) increased 26.9%. The streamlining process resulted in an overall improvement in the customer base and a further 4.8% increase in prepaid ARPU from the end of June 2020, ”Cell C said in a statement.
Operating margin
CFO Zaf Mahomed said that despite difficult circumstances affecting business spending, the company could still improve its operating margin.
“The first six months of 2020 were characterized by the continued slowdown in the economy that weakened overall customer spending. We have taken active steps to reduce our focus on pure revenue and subscriber growth and have shifted to more profitable long-term growth in the prepaid and contract segments. We were also able to generate R418 million more cash from operations compared to the prior period ”.
Reported earnings before interest, taxes, depreciation and amortization were R1.2 billion, down from R1.4 billion. Assets worth R5 billion (network assets and rights of use) were affected by the new MTN South Africa network agreement. Earnings before interest and taxes (Ebit) were a loss of R5.3 billion, compared to a gain of R90 million in the first half of 2019. Excluding one-time recapitalization and restructuring costs, Ebit for the first half of 2020 have been at R162 million, an 80% improvement, said Cell C.
“We remain focused on restructuring the balance sheet and optimizing the business for long-term competitiveness. We have an inherited debt challenge on our balance sheet instead of one on the income statement, which will be addressed with the recapitalization, ”Mahomed said.
CEO Douglas Craigie Stevenson said Cell C’s focus will be on delivering the right solutions and services and understanding the needs of its customers.
“To remain competitive, Cell C had to take a different approach to our big rivals who are all heavily invested in capital-starved 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 in infrastructure but we will compete in products and services. “- © 2020 NewsCentral Media
