South Africa’s Cell C confident of cash flow to settle debt, executives say

By Nqobile Dludla

JOHANNESBURG, Sept 12 (Reuters) – 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 told Reuters.

Under Chief Executive Jorge Mendes, the once struggling company is going through another recapitalisation aimed at gaining financial independence from majority 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.

“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 5.5 billion rand ($307 million) in 2017 and increased it to a non-controlling 49.53% stake in 2022 after lending Cell C 1.03 billion rand to partially settle its debt. It also provided working capital.

Cell C currently holds 5 billion rand of shareholder debt and just under 2 billion rand 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,” Kope said.

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.

The company is also looking to franchise the bulk of its 44 corporate-owned stores and be left with three or four in its stable, Mendes said. It has a total of 107 stores.

($1 = 17.9273 rand) (Reporting by Nqobile Dludla;Editing by Elaine Hardcastle)

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