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Cell C to roam on MTN amid Telkom buy-out talks

South Africa’s troubled third mobile network operator will solve some of its accessibility issues with the new roaming deal, as a potential acquisition by Telkom looms, writes ARTHUR GOLDSTUCK

Cell C has signed a nationwide roaming agreement with MTN that will address some of the issues facing South Africa’s beleaguered third mobile network operator.  The company says the agreement will enable network innovation, and promote efficient network infrastructure utilisation. it will also form the basis for “sustainable investment in network infrastructure”.

Cell C and MTN have had an initial roaming agreement in place since 2018, but providing 3G and 4G services only in areas outside of the main metros. The expanded agreement extends this coverage to nationwide roaming. Cell C says it will see 4G network coverage extended to 95% of the population, giving customers will have access to over 12,500 sites, of which 90% are LTE enabled. 

This addresses one of the main issues experienced by Cell C customers, namely patchy reception and coverage. The result of limited service was that, while it had a 16-million-plus user base, it had difficulty turning this vast clientele into profit.

Subsequently, Telkom has expressed interest in acquiring Cell C, to bolster its fast-growing mobile division. Its latest interim results for the six months ending September 2019 revealed it had grown 75% year-on-year to 11.5-million. A merger of the two mobile operations would bring Telkom/Cell C to around 29-million users, making it a direct market share rival to MTN’s 28.9-million at the end of September – down from 29.2-million the previous quarter. Vodacom reported a massive lead in its interim results to the end of September, with 43.8-million users – ironically also down marginally from the previous year’s 44-million.

The roaming agreement will strengthen Cell C’s service offering, while boosting revenue for MTN

“This is a pivotal step in Cell C’s turnaround strategy,” says Douglas Craigie Stevenson, CEO of Cell C. “One of the key pillars of this turnaround is to implement a revised network strategy that enables Cell C to manage its network capacity requirements in a more cost-efficient and scalable manner.”

Cell C says the agreement is in line with shifts in the global telecoms industry towards more cost-effective network strategies that drive down costs and deliver greater operational efficiencies that ultimately benefit consumers. 

“This roaming agreement is transformative for Cell C,” says Craigie Stevenson. “The company is no longer encumbered by the high costs of building a network footprint and we can focus our energy and efforts into developing innovative and disruptive service offerings that will be welcomed by data-hungry consumers.  This is a win-win all round as it has long-term benefits for the economy, the industry and ultimately consumers.”

The implementation of the expanded roaming agreement will take around 36 months, commencing in early 2020. Cell C and MTN will maintain their own spectrum and each party will use its own frequencies, ensuring they comply with regulatory requirements. This also means Cell C will still have all of its licences and control its core network, transmission, billing system and subscriber management.  

Cell C says its turnaround strategy is focused on ensuring operational efficiencies, restructuring its balance sheet, implementing a revised network strategy and improving overall liquidity. 

Since reporting a loss of R8-billion for the financial year ending May 2019, says Cell C, it has seen incremental improvements to the bottom-line as the operational efficiencies start to have a positive impact on the financial performance of the company.

Zaf Mahomed, chief financial officer of Cell C, says: “The management focus on retaining profitable customers and expenditure savings has generated meaningful positive cash flow improvement on a month on month basis. It is a good sign that we are doing the right things and are on the road to recovery.” 

He says Cell C continues to pursue a recapitalisation, which will improve the company’s overall liquidity.  Independent financial and legal advisers have been appointed representing the lenders,  and “constructive discussions on the recapitalisation are underway with them and other stakeholders in respect of various proposals”.

Cell C’s loss also resulted in the worst financial performance yet from Blue Label telecoms, which bought a 45% stake in the company for R5.5-billion in 2016. For the year ending May 2019, it reported a net loss of R6.6-billion, of which more than half was attributable to its stake in Cell C.

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