Cell C’s failure to live up to its promise is only partly
explained by the fact that it was a late entrant to a market dominated
by Vodacom and MTN. But having eluded business rescue, its best bet now,
for not just survival but injecting more competition into the sector,
hinges on an R8bn deal with new shareholders with compelling ideas on
how to turn the company around.
Cell C remains a speck in the distance behind Vodacom and
MTN: it has yet to reach the 20% market share that the then-CEO boasted
about when it launched in 2001, has only just recorded its first net
profit, and its prospects of closing the gap to its two Goliath-like
rivals seem vanishingly slim.
If the goal, for the regulators, was increased competition,
it worked almost immediately. But whatever Cell C did, its rivals were
able to match. And while then-CEO Talaat Laham initially saw Cell C
turning profitable by year five, it did not hit that goal.
Facing a crippling R23bn debt load, Cell C was on the brink
of being placed in business rescue (and if you want a taste of what
happens there, consider the sad tale of Stuttafords). But its largest lender, the Industrial & Commercial Bank of China, agreed to a stay of execution.
It’s a grim story, principally because were Cell C to go
belly-up, it would harm consumers as it would strengthen the pricing
power of the remaining duopoly of Vodacom and MTN.
Mercifully, it looks like a white knight has ridden to Cell C’s rescue in the nick of time.
This is a glimpse into Financial Mail's in-depth cover story on Why Cell C should be saved.
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