Struggling mobile network operator Cell C recorded an after-tax loss of over R832 million between June 2021 and November 2021.
This was revealed in Blue Label Group’s financial results for the six months ended November 2021.
Blue Label holds a 45% share in Cell C through its wholly-owned subsidiary, The Prepaid Company (TPC).
The loss was a significant downturn from the more than R1.2 billion in profit Cell C made during the same period in 2020.
A part of the blame could be attributed to Cell C’s revenue declining from R7.12 billion for the six months in 2020 to roughly R6.68 billion in 2021.
Cell C is currently undergoing a multi-year restructuring due to its significant financial troubles.
The company has defaulted on debt repayments and incurred billions in losses over the last few years.
As a result of its poor performance, Blue Label impaired its investment in Cell C to nil in May 2019. This has remained the case for the latest results.
However, the company believes Cell C remains a going concern due to several plans for its restructuring.
The process includes the complete shutdown of its own physical radio network infrastructure and the migration of all its customers to roaming on MTN and Vodacom’s networks.
In addition, it is cutting unprofitable customers and products and reducing its staff expenditure through retrenchments.
According to its financial results for 2021, it almost halved its staff headcount from 2,600 to 1,340.
Delays have hampered the planned recapitalisation of the company.
“Herculean” rescue effort
Protea Capital Management senior investment analyst Richard Cheesman previously told MyBroadband it would be a herculean feat if Cell C’s restructuring were successful without considerable losses to investors.
Cheesman said the operator’s survival hinged on the restructuring process, including lenders being asked to take a haircut on the debt.
Cell C has only continued operating because its lenders have not called in their owed debt.
According to the company, they understand Cell C is worth more as a going concern and would recover more debt should it continue to operate.
But Cell C’s viability will be in jeopardy should its restructuring and recapitalisation process fail, in which case, the company may have to be dismantled.