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.”
