Cell C’s Zaf Mahomed says new operating model will prove beneficial in the longer term

The CFO explains that the new model will be offset by savings in network capex, lease payments and more.

Cell C has announced continued improvements in its profitability and operational efficiency as it implements its new operating model. The group reported a R148 million profit before tax for the six months ended June 2021, compared to a R7.6 billion loss for the first half of 2020.

The group said that it is making good progress on its three-year transition to a virtual RAN (radio access network). “In this wholesale aggregator model, transition and virtual RAN costs will increase as we bring on sites on a like-for-like basis,” says Cell C CFO Zaf Mahomed. “This will be offset by the savings in network capex, related lease payments, as well as reduced network maintenance-related costs.”

He adds that, even though the RAN costs will result in a decreased EBITDA, the net result will be lower depreciation, as well as an increase in cash flow due to the savings on capex and lease payments.

“Cell C would need more than R5 billion capex annually to build a comparable network. This would also take several years to implement,” he says. Instead, the operator is deploying an asset-light infrastructure model and plans to invest capex of R1 billion a year, which includes technologies to support the platform model it is implementing as it evolves to a technology company.

“Our three most valuable assets that are not on our balance sheet and underpin our transformation journey are spectrum, a loyal and profitable customer base, and a resilient brand,” Zaf explains. “Together with our network strategy, consumer-driven digital products and solutions, as well as our focus on a high-performance culture, we have a sound platform from which to compete and assist us to deliver on our strategic intent.”