This is according to well-placed industry sources who told MyBroadband that Cell C continues to suffer because of its high debt burden.
Cell C told MyBroadband that it is currently in R8.9-billion debt, as per its latest financial results.
Its poor financial situation is aggravated by a net loss of R1.273 billion for the year ended 31 December 2018.
Blue Label troubles
Cell C’s biggest shareholder – Blue Label Telecoms, which owns an effective 45% stake in the mobile operator – has been punished by the market since its acquisition of Cell C.
Blue Label Telecoms finalised its recapitalisation of Cell C on 7 August 2017, which formed part of its plan to cut the mobile operator’s debt from R20 billion to R6 billion.
It also announced ambitious plans to turn around the mobile operator’s financial fortunes, but the market was not convinced.
Blue Label Telecoms’ share price plummeted from R17.04 when the deal was concluded to R3.58 on 20 March 2019 – a 78% decline in less than 2 years.
Cell C has already seen drastic changes at the company since then, which include the departure of its CEO Jose Dos Santos on 1 March 2019.
The company has also withdrawn its Miss South Africa sponsorship after five years as a major sponsor of the pageant.
These changes are, however, mild in comparison to what industry sources said the company is considering: outsourcing its network operations to MTN.
MyBroadband has learned that Cell C is in discussions with MTN to potentially manage its network to cut its operational expenses.
Cell C already roams on MTN’s network in areas where Cell C has chosen to purchase coverage rather than self-build.
A network management services agreement with MTN can save Cell C a lot of money, but it will be challenging to get past regulatory hurdles to make it work.
The Competition Commission previously recommended that the Competition Tribunal prohibit a similar deal between MTN and Telkom.
In this case MTN was planning to take over financial and operational responsibility for the rollout and operation of Telkom’s RAN, with reciprocal roaming agreements.
One industry source told MyBroadband that it will be possible for such a deal to be successful, but that MTN and Cell C will have to be very careful about how the agreement is structured.
Cell C has sidestepped questions about the issue, though. Instead of commenting on the discussions with MTN, it merely pointed out that it roams on MTN’s network and currently manages its own network.
MTN would not directly comment on questions about discussions with Cell C, but did say it is always exploring options to lower the cost of operating the network.
“There are various options available to our customers, but it would not be appropriate to comment on any customer operations, in any context,” said Jacqui O’Sullivan, executive for corporate affairs at MTN South Africa.
Cell C’s big hope
Cell C is confident that it can become financially sustainable, with its hopes hanging on a deal with the Buffet Consortium – which is backed by billionaire Jonathan Beare.
In February 2019, Blue Label Telecoms announced that Cell C has “concluded a binding term sheet” with The Buffet Consortium which will see it become a minority shareholder in the mobile operator.
Cell C told MyBroadband that a large part of the financial sustainability plan is to conclude the principles of the Buffet Consortium term sheet.
This deal, Cell C said, will bolster its balance sheet and ensure its sustainable growth for the future.
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