Can Cell C be salvaged?
BAD DECISIONS: COMPANY DROWNS IN DEBT
Pending financial reports to indicate if recapitalisation will proceed.
MTN entered into a roaming agreement to allow Cell C to piggyback on MTN’s network. But last month, MTN noted Cell C didn’t make payments on its service agreement and the total unpaid bill was R393 million. MTN wrote off about R211 million. It said it would evaluate the sustainability of the agreement. Cell C and Blue Label said they were working to address concerns raised.
In August, S&P Global Ratings downgraded Cell C to default status. In July, Cell C failed to make interest payments worth R194 million on certain bilateral loan facilities. Bloomberg quoted Cell C as saying it was in talks with lenders to work on its debt profile, and plans to complete business recapitalisation by the end of 2019.
In July, Cell C said it had appointed Bowmans to investigate suspected irregular business practices.
In August, Cell C announced it would review channel options for its streaming service Black, launched last year. Based on 2018 financial figures, Cell C spent close to R524 million acquiring programming and movie rights; 2.5 million people browsed the catalogue; and 260 000 accessed Black via free trials. It’s challenging to determine whether the investment has yielded a return.
Vodacom, MTN and Telkom’s full-year reporting shows SA’s mobile market has hit maturity. Growth and survival through the fourth industrial revolution depends largely on the ability to invest in capital infrastructure and drive innovation.
In February, Cell C signed a binding term sheet with Buffet Investments. Buffet would acquire a minority investment and the funding would be used to recapitalise the business.
Cell C’s financial statements are eagerly awaited, to see whether its recapitalisation will proceed.