An operational profit of R705-million in the second half of 2019 highlights the extent to which Cell C’s turnaround strategy has delivered improved operational efficiencies.
The mobile operator’s annual results for the year ending December 2019, released today, made much of comparing the first six months to the last six months of 2019, as it encapsulated the effects of the turnaround strategy. In this period, gross profit increased by 9% and EBITDA (earnings before interest, tax, depreciation and ammortisation) more than doubled to R1,7-billion. Excluding impairments, the mobile operator made a profit of R705-million, before interest and tax, in the last six months of 2019.
Cell C’s CEO, Douglas Craigie Stevenson, describes these as the green shoots of the turnaround strategy, which was implemented from March 2019 onwards.
The turnaround strategy was focused on operational efficiencies, including cutting costs that do not translate into revenue generating opportunities, minimising operating expenses, and optimising traffic. The second pillar is a network strategy which is an evolution of the capex-intensive, high fixed cost infrastructure-based network, to a variable cost opex model. Finally, it included improvement in liquidity and a new capital structure through a recapitalisation.
“Operationally the business is stronger and a successful recapitalisation will secure the long-term sustainability of Cell C,” says Craigie Stevenson.
Despite the tough economic conditions, Cell C maintained its revenue levels throughout the past year. Revenue for the full annual period up to December 2019, remained steady at R15,2-billion (2018: R15,67-billion) with service revenue, which contributes 94% to overall revenue, dropping by 1%. The second half of the year was once again a better one for Cell C with mobile increasing by 4% and wholesale revenue was up by 17% (when comparing H2 to H1 of 2019).
Zaf Mahomed, CFO of Cell C, says: “Although there was a decrease of 2,9m prepaid customers – a 21% drop – in the 12 months to 2019, the margin on our existing customers is better as a result of acquiring profitable customers and not signing on a customer at any cost. Revenue from equipment sales, on a year-on-year basis, was 27% down as we moved away from subsidising customers at all costs. This enabled us to build a quality customer base with better margins and quality of service.”
More than half-a-billion Rand (R522-million) was saved during the past six months and operating expenses was 18% lower when comparing the first half of 2019 with the last, with operating expenses for H2 2019 at R2,4-billion.
“There were several contracts and transactions that were reviewed or re-negotiated,” says Mahomed. “This was to streamline the business and ensure that the costs incurred are business beneficial. For example, the negotiation of the black liability realised savings of R177-million.”
Mahomed said the business showed a solid, positive R705-million in earnings compared to H1 which saw a loss of R35,6-million.
Cell C recently decided to review its operating model and organisational structure, specifically at a senior manager and executive level. This has resulted in highlighting a number of inefficiencies that are contributing to the operating and financial challenges the company currently faces. Consultations are expected to be concluded by the end of April 2020.
Craigie Stevenson says: “This set of results is based on our old model, we are confident that a new way of business based on the extended roaming agreement with MTN will lead to even greater strategic clarity and operating momentum.
“We are shifting from a build and buy strategy with high capital expenditure to a roaming model. By effectively managing traffic we ensure the network cost is aligned with the network revenue. It does not make economic sense to continue to invest in capital-hungry infrastructure and the business is now positioned to go into the next phase with our roaming agreement.”
Craigie Stevenson says that Cell C is now an operationally sound business that is financially viable and competitive.
How retailers must respond to life under lockdown
As businesses settle into lockdown, South Africa’s largest second-hand retailer, Cash Crusaders offer other retail businesses – that have also been forced to close, some advice and recommendations on preparing for, and managing through the lockdown. The group that have been operating for over 20 years with over 220 stores nationwide, also offer advice on considerations retail store owners – and other businesses, should make as the country makes their COVID-19 economic recovery.
Follow the rules
Ensure that you follow the rules set out by our President for the lockdown. As bitter as this pill may be to swallow, the longer-term benefits for our country and our businesses far outweigh the frustration and anxiety you may be feeling now. This is not a time to break the rules. #StayAtHome. It is a time to practice human responsibility, not complain about Human Rights being compromised. Countries who initially implemented loosely managed lockdowns, have had to extend to get the pandemic under control, so strict rules from the get-go will prevail in the fight against the virus.
Secure your stores
By now you should’ve secured your valuable goods and should have ensured all your security systems are in good working order. If you haven’t already, make sure your security companies have your correct contact information. Make sure your necessary insurance cover is up to date.
Keep your staff informed
They are and continue to be your most important asset!
By now, you may have needed to investigate UIF benefits to compensate for your employees loss of income. The Minister of Employment and Labour, T.W Nxesi has recently announced measures that the Department will put in place under the current special circumstance relating to the Corona virus (COVID-19) and its impact on UIF contributors.
The Temporary Employee/Employer Relief Scheme (TERS) has been set up under the auspices of the Unemployment Insurance Fund (UIF). Employers apply for the TERS on behalf of its employees.
The TERS has two distinct advantages over UIF
- All employees qualify for up to 3 months of benefits, irrespective of how long they have contributed to the UIF and
- TERS will not pay any employee less than the minimum wage.
You can benefit from the TERS by sending an email to email@example.com. Applicants will then receive an automated response which outlines the steps you will need to take, as well as the details surrounding them – including the requirements to claim benefits. During the lockdown period, the Department of Labour will not accept manual applications (to reduce physical contact and risk of the virus spreading), this is to reduce contact between people to curtail the spread of the pandemic. A hotline number has been created by the UIF (012-337 1997) for Covid–19 TERS Benefit enquiries during the lockdown period.
Be sure to be calm when addressing any concerns with your team – they are anxious and nervous of what the eventuality of this outbreak may be.
Communicate with your bank
Make sure you’ve been in touch with your bank (as they are still operational) and discuss any loan repayment relief or postponement over the lockdown period (the banks have termed this a “payment holiday”). Work with them on a cash flow plan as once the lockdown has lifted, trading businesses will need liquid cash.
Contact your landlord
Ensure you’ve connected with your landlord to discuss and agree on any possible repayment or rent relief/payment holiday they may be able to offer you. Keep the channels of communications open with your landlord and bank – rather over-communicate than not communicate enough.
Keep communication open with your customers
The country may be on shutdown, but the internet isn’t. Communicate with your teams and customers by whatever necessary and relevant communication channels you have available to you – website, social media, PR/Marketing teams, newsletter dissemination etc.
Use this time wisely
Amidst all the chaos this time brings, there is also a silver lining. We all have time at this stage, but how many of us make valuable use of that time? Particularly when it comes to family. Business is demanding most times so with a forced shutdown of business it give you the time to spend with your family, catch up on outdated maintenance around the house and a period of rest. This lockdown period will also afford you uninterrupted strategy time. Take the time to reflect on areas of your business you can improve or evolve. Strategise ways to do things better or differently. Use the resource available via your own business network as well as the countless online content that is available, to work on a plan for the way forward. Consider your financial, loan and other business administration processes you have in place and look at new ways to optimise the channels and areas you’re working with or within. A host of online learning facilities offer short courses – perhaps consider upskilling yourself or members of your team by signing up for one of these too.
“These are some of the steps we’ve taken within our own organisation,” says Sean Stegmann, CEO of Cash Crusaders. “Having been in this business for as long as we have has afforded us the wealth of experience we’re able to share with our franchisees and other retail business owners to help navigate the next few weeks and recovery period,” he says. “Take it one day at a time and know that the decisions we’re being forced to make today will mean a future for us tomorrow, both in business and in health!,” he concludes
Vodacom cuts cost of smallest bundle by 40%
The country’s largest mobile operator has kept to a promise made last month to slash the price of entry-level data packages
Vodacom has cut the data price of its lowest-cost bundle by 40%, reducing the price of a 50MB 30-day bundle from R20 to to R12. This follows from the operator’s promise in March, when it announced a 33% cut in the cost of 1GB bundles, to reduce prices of all smaller bundles by up to 40%.
Vodacom’s various 30-day data bundle prices will be cut across all of its channels, with the new pricing as follows:
|30-day bundle size||New Price||Reduction|
Vodacom confirmed it will provide free data to access essential services through Vodacom’s zero-rated platform ConnectU with immediate effect. The value of these initiatives, it says, is R2.7-billion over the next year.
“Vodacom can play a critical role in supporting society during this challenging time and we’re committed to doing whatever we can to help customers stay connected,” says Jorge Mendes, Chief Officer of Vodacom’s Consumer Business Unit. “Since we started our pricing transformation strategy three years ago, our customers have benefitted from significant reductions in data prices and the cost of voice calls. Over the same period, we invested over R26 billion in infrastructure and new technologies, so our customers enjoy wider 2G, 3G and 4G coverage and vastly increased data speeds.”
The latest data reductions will complement the discounted bundle offers that will also be made available to prepaid customers in more than 2,000 less affluent suburbs and villages around the country. For qualifying communities to access further discounted voice and data deals, they need to click on the scrolling ConnectU banner on the platform via connectu.vodacom.co.za
ConnectU – which is a zero-rated platform – also went live this week. It will provide content aimed at social development and offers a variety of essential services for free. Learners and students enrolled in schools and universities can access relevant information for free, with no data costs. The ConnectU portal includes a search engine linked to open sources such as Wikipedia and Wiktionary as well as free access to job portals; free educational content on the e-School platform; free health and wellness information and free access to Facebook Flex, the low data alternative to Facebook that enables customers to stay socially connected.
Vodacom’s popular Just4You platform has been a significant contributor to the approximately 50% reduction in effective data prices over the past two years. Substantial cuts in out-of-bundle tariffs and the introduction of hourly, daily and weekly bundles with much lower effective prices have also driven increased value and affordability, resulting in R2-billion in savings for customers in 2019.