Laggard gets R5.7bn transfusion

FLOUNDERING small-time operator Cell C scored R5.7-billion of funding this week, but questions still remain about how long the David of the cellular industry can continue to fight against the two Goliaths.

Cell C received a R3.5-billion equity injection from its parent company Dubai-based Oger Telecoms and a R2.2-billion loan from Nedbank, the Development Bank of South Africa and others.

But acting chief financial officer Robert Pasley said the injection of new cash — half of the bank debt is to refinance existing debt — does not mean Cell C is in trouble.

“It’s quite the reverse. The investment has been put into the business because our investors have confidence in the business plan and Nedbank, DBSA and some of our other suppliers also have confidence in the business plan,” said Pasley.

Cell C has not released its profit numbers, but industry insiders believe the company has burnt through millions in a quest to bolster its market share — a strategy largely built on cutting call rates to the lowest in the business, 99c a minute. It worked to some extent: over the last year, Cell C has added 2.5 million subscribers to leave it with around 11 million people.

CEO Alan Knott-Craig, who founded rival Vodacom but who has been at the helm of Cell C since April last year, said the cash injection from Oger Telecoms would be used to run the business, while the bank debt would be used to expand its network.

When he took charge, Knott-Craig spoke about how Cell C aimed to grab 25% share of the market. But at around 16%, it is still well shy of that target.

In April, Knott-Craig told Business Times that Cell C would inevitably, at some stage, “be part of a bigger group, or a smaller group will join us and we become a bigger group”.

This week’s influx of new cash may give Cell C more time to plot its strategy. The one thing Knott-Craig constantly bemoans is the weak regulatory environment in the ICT sector.

The Independent Communications Authority of SA recently announced a decision to undertake a market review, a process Knott-Craig seems to have spearheaded.

The outcome of the review is something Cell C’s shareholders will be watching closely and may affect future investments in the company.