South Africa: Cell C Results Ignore Operating Losses

Mergers, Acquisitions and Financial Results

Unlisted cellular network operator Cell C has done its usual trick of issuing only positive trading figures, declining to disclose how much money it actually lost during the year to December 31.

Revenue climbed to R8.6bn, up 14% from R7.5bn a year ago, generated from its 6.4-million subscribers, up 34% from 4.6-million. But earnings before interest, tax, depreciation and amortisation fell to R812m, dropping from R1bn last year.

The main missing figure is the operating loss, however, since Cell C is burdened by billions of rands in interest-bearing debts that drain its cash each month. A year ago those business-building debts stood at R14,3bn, but being unlisted it has no need to issue figures it does not want made public.

Outgoing CEO Jeffrey Hedberg said the results were positive, given the tough economy and the pressure on people's disposable income. The increase in customers was achieved as client acquisition and retention strategies bore fruit, and tighter management control had kept costs at "adequate" levels while profit margins remained satisfactory. "I believe the team has met the expectations of both our customers and shareholders," he said.

In an effort to deflect speculation that its majority owner, Saudi Oger, may sell the company after failing to make a net profit over eight years, Cell C chairman Simon Duffy said the shareholders were fully committed and would continue to invest in its success.

Hedberg has already been replaced after saying he would not be renewing his contract in November. New CEO Lars Reichelt said Cell C had performed well in most areas but still had significant room for improvement. Growth potential remained strong and Cell C would aggressively expand its network coverage and improve its operational and financial performance, he said.

Business Day