Missed MTN payments underscore Cell C’s woes

Cell C has missed several payments to national roaming partner MTN South Africa, underscoring the dire financial straits in which the country’s third-largest mobile operator finds itself.

MTN Group said in its interim financial statements, published on Thursday, that under modern accounting rules, it has not recognised revenue amounting to R393-million for roaming services provided to Cell C for the six months ended 30 June 2019.

“We are evaluating a sustainable solution to the agreement with Cell C,” MTN said.

MTN Group chief financial officer Ralph Mupita said: “When you believe there is a possibility that when you invoice (someone) you might not be paid, you have to make that accounting judgment. The quantum was the R393-million…”

Mupita said Cell C made “some payments” to MTN following the end of the group’s reporting period (30 June). “They have notified us that they have secured funding that allows them to improve their liquidity situation,” he added. “The South African team is working toward putting together a non-binding term sheet (for national roaming). If that works, there will be substantial benefits for them and for us.”

Much hinges on a successful further recapitalisation of Cell C from the Buffet Consortium, led by businessman Jonathan Beare. Cell C’s largest shareholder, Blue Label Telecoms, said earlier this week that the Buffet recap plan is proceeding well. It’s reasonable to assume details of the transaction will be announced around the time that Blue Label reports financial results later this month.

‘Cash flow issues’

MTN Group CEO Rob Shuter said it is “well known in the market” that Cell C has had “some operational and cash flow issues”. He said it’s hoped that an expanded roaming agreement will help alleviate some of the pressures Cell C is facing.

“It will be positive for them to allow them to manage their capex and opex (better),” Shuter said. “It will take a couple of months to get that in place (but) … we are hopeful things will look better (in the second half) on that front.”

MTN South Africa CEO Godfrey Motsa said any agreement the company enters into with Cell C must be in the interests of MTN shareholders. But the company will also consider the national interest, he said.

A wholesale acquisition of Cell C by MTN — or by Vodacom, for that matter — is unlikely to pass regulatory muster. The only other local potential suitor, Telkom, walked away from a deal last year and its CEO, Sipho Maseko, has said he is longer no interested in an acquisition of Cell C.

Cell C hadn’t responded to questions from TechCentral at the time of publication.  — © 2019 NewsCentral Media