Telkom relegates Cell C to fourth place in SA mobile

Ten years after it launched its first mobile offering in the form of 8ta, Telkom has surpassed Cell C to become South Africa’s third largest mobile operator by subscriber numbers.

This became evident on Thursday when Blue Label Telecom, Cell C’s largest shareholder, published its annual financial results showing that Cell C’s subscriber base had dipped by about a quarter between May 2019 and May 2020.

Cell C said it had 11.8 million total subscribers as at 31 May 2020, down from 15.9 million a year ago, a decline of more than 25%. Telkom had 12 million customers at its financial year-end in March and has likely added to that tally since then.

In the year to 31 March 2020, Telkom said it was the fastest growing mobile business in South Africa. The company grew its mobile service revenue by 54.4% year on year to R12.6-billion on the back of the strong subscriber growth.

Cell C and Telkom have now taken starkly different growth strategies. While Cell C is in the process of outsourcing its radio access network to rival MTN South Africa – it will no longer own an access network in future, dramatically reducing its capital expenditure – Telkom continues to spend big on its network.

Not concerned

Indeed, Telkom CEO Sipho Maseko said in the group’s recently published annual report that its growth in mobile is “underpinned by our ongoing network investment and our successful broadband-led propositions, which continue to resonate well with customers”.

In an interview with TechCentral ahead of Blue Label’s results on Thursday, Cell C CEO Douglas Craigie Stevenson said he is not concerned about the steep decline in the company’s subscriber base, saying a 2% decline in service revenue to 31 May, relative to the 25%-plus reduction in the subscriber base, shows that it has got rid of unprofitable customers, a strategy he said makes sense.

“We have reached the bottom” in the number of subscribers, Craigie Stevenson said. Still, he said Cell C’s performance is not going to be measured by subscriber numbers but rather by “whether it can pay its bills and is building a sustainable business”.

“I could quickly go out tomorrow and make a ridiculous offer (to consumers) and quickly add two million subscribers, only for them to churn in six months. I need profitable customers – we need good subscribers that we look after properly,” he said.

Cell C continues to work toward a complex recapitalisation aimed at reducing the level of interest-bearing debt on its balance sheet. Craigie Stevenson said discussions between the relevant parties, including shareholders, continues and that term sheets – the final stage of the recap plan – will likely be signed in the next month or two.  — © 2020 NewsCentral Media