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‘No irregularities at this stage’ – Cell C CEO

Douglas Stevenson says the company’s debt is significantly higher than anticipated.

NOMPU SIZIBA: Speculation has been rife about the continued viability of telecom company Cell C, which is known to be burdened with significant debt. This has led to Blue Label, which owns a significant stake in Cell C, seeing its share price plummeting. Recently appointed Cell C interim CEO Douglas Craigie Stevenson has sought to allay concerns by publishing an open letter indicating that Cell C has indeed been beset by financial sustainability issues, but that a turnaround strategy is in place and efforts are being made to get the company back on an even keel.

Read: Trouble at Cell C

Well, to expand on the issues for us, I’m joined on the line by interim CEO Douglas Craigie Stevenson. Thanks very much for joining us, sir. When you took over as interim CEO of Cell C in March this year, what were the fundamental challenges you found at the company?

DOUGLAS CRAIGIE STEVENSON: Good evening, Nompu. Thank you. The two biggest challenges we had were around the drifting balance sheet structure, and the debt stack that we had – and then the liquidity together with that.

The business was also not, to my mind, running optimally, and so it was imperative that we develop a plan to optimise the business and get the business structure correct to be able to execute a strategy to make sure that we are sustainable in the industry.

NOMPU SIZIBA: Indeed I understand that’s precisely what you were hired for. What measures have you put in place to try and achieve those goals?

DOUGLAS CRAIGIE STEVENSON: The first thing is to get the business streamlined properly and to ensure that we have adequate resources, and to direct the resources that we have within the organisation to revenue-generating [areas] and slimline processes and efficiencies that were not as good as they should be. And to simplify the business model.

There are two parts to this. The one is obviously the new structure of the business and the second part is the optimising of the performance.

We’ve done a number of things in terms of optimising the performance of the business. The most important of those is to start having the Credit Act austerity measures, where we were not spending correctly. We direct expenditure into different-from-declared places. And then, also with the assistance of various bodies, ensure that we are procuring and getting the right value for what we were doing in our value chain.

NOMPU SIZIBA: Do you get the sense that there’s been some jiggery-pokery at the firm, since you had to appoint law firm Bowmans to look into whether there have been irregularities at the company?

DOUGLAS CRAIGIE STEVENSON: I think one must be sure that we understand the purpose of appointing people to check irregularities. There are no irregularities at this stage. What I’ve done is made sure that there is clarity and credibility around any statements and that I can say, hand on heart, that these processes, wherever they may be in the business, have been huge problems. We’ve had a business that’s been in existence for almost 19 years and we were lethargic, in my view, and we need to make sure that everything we do is done with the right clarity and for the right reasons, and viewed as being proper.

NOMPU SIZIBA: I suppose you then start from a proper base that way. You’ve indicated that you are in discussions with various stakeholders, with a view to achieving a secure financial position. What sort of options are you looking at?

DOUGLAS CRAIGIE STEVENSON: The current option is to look at the debt takeover – and that was part of the deal that we have now. But the big thing is that we have got significantly higher debt than we anticipated, with the debt growing.

And the next thing is the cost of the debt. We must try to ensure that we can get our cost of debt down to a more palatable level, because we are paying a significant premium on the debt.

NOMPU SIZIBA: When all is said and done, and the fundamental issues are sorted, will you be able to survive in the competitive landscape you operate in? There have been rumours, long before you came on board, of a possible tie-up with other telecom companies, because you guys are considered so small.

DOUGLAS CRAIGIE STEVENSON: I think the question is very valid, and centres around whether there is space for four operators in the South African environment. I certainly believe there is.

I think we find ourselves in a position where we need to be able to look at the advantages that we have, because we are going to be forced into a position of survival. It’s not ideal for consolidation in the market at the moment, I believe. I think we need to be pushing towards getting more efficient, more innovative, more customer-centric, and more focused around what we deliver as a product. Telecom industries need to look at reinventing themselves. We are in a position now where we seriously have to do to that. And that is going to be what my managing team and I are putting together with our strategic view.

NOMPU SIZIBA: Thank you, Douglas, and all the very best with that.

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Cell C’s debt mountain has been an open secret for a while, but yes, I’m sure there a few folks at Blue Label wondering why on earth did they get into this deal. A kind of “what the hell was I thinking!?” moment there.

There was a time when Cell C was a market/consumer darling but Telkom Mobile has stolen that crown. There’s also no reason for Telkom to buy Cell C anymore. Maybe it comes down to selling a service at a loss against competitors in order to attract market share. At some stage the music stops though. A price war cannot run for so long without a casualty, even if the casualty started it….

End of comments.





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