Cell C confident it can trade its way out of debt

Cell C chief financial officer El Kope

Cell C, South Africa’s fourth largest mobile operator, is confident it will have enough cash to settle its shareholder debt due in the next three to five years, as it continues to execute a turnaround plan, its top executives have said in an interview.

Under CEO Jorge Mendes, the once struggling company is going through another recapitalisation aimed at gaining financial independence from largest shareholder Blue Label Telecom.

Mendes said the group’s free cash flow before debt obligations is expected to turn positive in about two months, while its operational cash flow is basically positive, chief financial officer El Kope added.

Cell C currently holds R5-billion of shareholder debt and just under R2-billion of lease obligations

“That’s a very good position, because that allows us to stop borrowing money to run the business,” Mendes said in an interview late on Wednesday. “Now we start looking at ways of how to sort out longer-term debts, shareholder loans, but not at the risk of compromising the operational business.”

Blue Label bought a 45% stake in Cell C for R5.5-billion in 2017 and increased it to a non-controlling 49.53% stake in 2022 after lending Cell C R1.03-billion to partially settle its debt. It also provided working capital.

Cell C currently holds R5-billion of shareholder debt and just under R2-billion of lease obligations on its balance sheet, Kope said. “We’re not going out looking for money from the shareholders to pay this debt. We are fairly confident right now that we will settle.”

Recovery

Cell C “has started seeing recovery” and “incremental growth” in 2024 prepaid revenue after year-on-year declines in the last three to four years, thanks to initiatives like price hikes and tweaking its sales channels’ strategy, Mendes said.