Cell C Seeks Network Deal With MTN in Battle for Survival

(Bloomberg) -- Cell C Pty Ltd. is in advanced talks with MTN Group Ltd. to gain more access to its network as South Africa’s third-biggest mobile-phone company strives to overcome mounting losses and add products such as financial services.

An extended roaming deal could be concluded within the next month, Chief Executive Officer Douglas Craigie Stevenson said in an interview. Cell C will gain additional access to MTN’s network in major cities such as Johannesburg and Cape Town.

“We are not a tower-owning company, our profits have to come from the services that we are able to offer customers,” said the CEO, who took charge on a permanent basis last month to replace the ousted Jose Dos Santos.

Cell C is struggling under 9 billion rand ($596 million) of debt, while full-year losses have ballooned to 8 billion rand from 656 million rand a year earlier. Its management team is in weekly calls with lenders to update them on plans and ensure the company pushes through a re-capitalization by the end of the year.

MTN confirmed it’s in discussions with Cell C. “We believe there are still opportunities to pursue, to the benefit of both businesses,” spokeswoman Jacqui O’Sullivan said in an emailed response to questions.

Liquidity Lifeline

A group of local banks have committed to provide temporary liquidity and extended the maturity of 1.2 billion rand of debt that was due to be repaid last month, Cell C said in a presentation on Thursday.

South Africa’s telecommunications market is dominated by Johannesburg-based rivals MTN and Vodacom Group Ltd., meaning smaller rivals such as Cell C have struggled. The carrier has come close to collapse on previous occasions, and in 2016 was rescued by a funding plan led by Blue Label Telecoms Ltd.

“It’s always been a stressed investment and a company that has not been performance-managed,” said Craigie Stevenson. “Deals were done to fix a funding gap, and did not have thought-out longevity.”

Other investments, such in TV-content platform Black, have absorbed cash without generating appropriate returns, the company said.

New management is examining all costs and looking to get the most out of Cell C’s assets, Chief Financial Officer Zafar Mahomed said in the same interview. The company wants the bad news out of the way so as to enable the start of a growth plan, he said.

Blue Label shares have slumped 45% this year, valuing the group at 2.7 billion rand.

(Update with graph and MTN comment in fifth paragraph)

To contact the reporter on this story: Loni Prinsloo in Johannesburg at lprinsloo3@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, John Bowker, Thomas Pfeiffer

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