In a positive development for Cell C, ratings agency Standard & Poor’s (S&P) has removed the mobile operator from its watch list for a possible downgrade.
This comes, S&P said in a note, after Cell C secured US$4,7bn in long-term debt with international banks to fund future capital investments. It was also able to effect “positive working capital changes” in June to fulfil the redemption of its R2bn in unsecured debt, the agency said. “It subsequently issued R3,3bn of notes to restore its liquidity.”
S&P said it is retaining its “B-” corporate credit rating on Cell C and removing it from its watch list for a possible downgrade.
“The stable outlook reflects that Cell C has ample liquidity to cover its current capital spending and debt maturity needs,” S&P said in the note. The company had put Cell C on its watch list on 1 June.
It said Cell C’s business risk profile is primarily constrained by its relatively weak market position as the number three operator in South Africa’s mature, four-player mobile market.
“We acknowledge Cell C’s established brand, improving network quality and customer growth. Still, leading competitors MTN and Vodacom continue to hold dominant market positions, while Cell C and number four player Telkom Mobile attempt to achieve scale and profitability.”
S&P said it expects Cell C to improve revenue growth over the next three years as it signs up more prepaid customers thanks to a competitive pricing strategy and through support from wholesale inter-network call fees that are skewed in its favour.
“Although we see potential for Cell C’s investments to result in meaningful revenue growth, the improvement in profitability required to achieve breakeven within the next three years may be challenging and relies on better prices for telecoms services,” the ratings agency said.
It said its assessment of Cell C’s risk profile incorporates an assumption that the company will remain reliant on debt issuance and financial support from parent Oger Telecom. — © 2015 NewsCentral Media
