MVNOs are doing the heavy lifting at Cell C - Jorges Mendes — Cell C CEO Jorge Mendes

Cell C’s wholesale division grew revenue 20% to R1.76-billion in the year to 31 May 2026, adding 1.2 million mobile virtual network operator subscribers. Data traffic from those MVNO users rose 131%, against 47% growth across the group as a whole. It was comfortably the strongest performance in the group.

The operator now carries 5.71 million MVNO subscriber lines, up 27.3% year on year, and reckons it hosts 80-85% of South Africa’s MVNO market. The strategy has been explicit since before the listing: rent the platform to banks and retailers rather than chase their customers directly.

The company’s best-known MVNO tenants include Capitec Connect, which had more than two million subscribers of its own when Cell C reported at the half-year, along with FNB Connect and Shoprite’s Knect Mobile.

Cell C has argued that wholesale revenue carries no distribution, marketing or base-management cost. But it is a more precarious position than the growth rate implies: MTN has said it wants to be South Africa’s leading MVNO wholesaler, Vodacom has entered the hosting market (though not with any real enthusiasm), and both are the networks Cell C itself roams on. Standard Bank moved roughly 300 000 subscribers from Cell C to MTN in 2024.

Asked on a results call how Cell C defends its dominant wholesale market position against its own suppliers, CEO Jorge Mendes told TechCentral that the arithmetic favours it. Customers migrating to MVNOs leave the networks roughly in proportion to market share, he said, so Cell C, which is South Africa’s fourth-largest mobile operator by subscribers, loses least and has the most appetite to win the business back wholesale.

The headline numbers

He also pointed to the cost structure: capacity Cell C sells itself carries Sim, marketing and distribution costs, while an MVNO partner has already sunk those, leaving a similar contribution margin on wholesale volumes.

Group revenue rose by 14% to R12.64-billion and adjusted Ebitda, or earnings before interest, tax, depreciation and amortisation, by 17% to R2.38-billion. Net debt fell to R2.02-billion from R5.69-billion, taking what Cell C reports as its net debt ratio to 1.56x from 4.29x. No dividend was declared, in line with guidance given at the listing.

Those headline numbers need unpacking, though, because two one-off effects accounted for most of the growth.

The larger is in prepaid, where revenue rose 9.7% to R5.81-billion. Cell C reports prepaid revenue net of discounts to its distribution channel, and those discounts fell from 13% of gross prepaid service revenue in FY2025 to 7.7% in FY2026. The reason? Legacy high airtime discounts with The Prepaid Company, a Blu Label subsidiary, ended when the listing completed.

Gross up both years on the discount percentages Cell C discloses and prepaid revenue grew roughly 3.4% rather than 9.7%, on TechCentral’s calculation. Close to 60% of the R516-million increase comes from Blu Label’s subsidiary no longer taking the same cut. It is a real improvement in economics, but it is a one-off.

Mendes said the underlying performance stands without the discount effect. Cell C had higher airtime discounts historically and “you see a bit of that benefit flow through”, he said. “But in spite of that, you’re still looking at just about double-digit growth.” Prepaid revenue did grow at double-digit rates in the second half on a reported basis.

The second is equipment revenue, which jumped from R119-million to R1-billion. That is not sales growth. Cell C previously accounted for handset sales on an agent basis with Comm Equipment Company as principal; CEC was consolidated from 27 November and is now reported gross. The switch accounts for R881-million of the R1.5-billion revenue increase, with CEC included for only six months. Service revenue, which strips equipment out, grew by a less flattering 6%.

Cell C added 1.3 million prepaid subscribers, taking the base to 8.07 million, a 19.1% increase. Prepaid average revenue per user fell 8.8% to R71.20 from R78. Blended Arpu across the business was R88 in the fourth quarter against R95 a year earlier. Churn averaged 11%, above the prior year.

Data usage per prepaid user rose 5%, and prepaid broadband Arpu improved 7% to R120.60.

The post-paid business was mostly flat. Revenue edged up 1.2% to R2.32-billion and the base was essentially static at 802 000 subscribers, against 798 000 previously. Arpu improved to R242 from R225 after low-value subscribers were cut and others moved to prepaid.

A second-half wobble

Cash remains tight despite the deleveraging. Cash and equivalents fell to R133-million from R182-million, net cash from operating activities declined to R1.6-billion from R1.86-billion, and the reported current ratio is 0.7:1, which management assesses at about 1.2:1 on an adjusted basis.

Asked how comfortable that is, chief financial officer El Kope said the working capital deficit is the balance sheet’s remaining problem and the group’s main focus.

Read: Cell C makes long-awaited JSE debut

Cash generation runs at about 44% of Ebitda for the year and 48% in the second half, which she described as healthy – but the cash goes to settling legacy obligations. “What you end up doing with that cash in our current business is paying off history,” she said.

Kope also said Cell C has not historically had access to market debt and wants to restructure its financing to fund handsets, the post-paid business and the enterprise segment, looking at “any solution, whether on balance sheet or off balance sheet”. Of the R2.15-billion in interest-bearing debt, R1.35-billion is the post-paid facility.

Mendes, who took Cell C to the JSE in November, said FY2026 was the year the turnaround became a platform for growth and that FY2027 is about converting it into higher-quality growth and stronger cash generation.

Cell C expects revenue growth of 5-10% from an adjusted FY2026 revenue base of R13.6-billion, against R12.64-billion reported, and adjusted Ebitda to rise from R2.7-billion to about R3-billion, against the R2.38-billion adjusted figure just reported. The difference is CEC on a full-year pro forma basis. Capex is guided at R750-million to R850-million.

Read: Blu Label’s earnings just fell off a cliff – on paper

Kope offered a cleaner way to read the business: normalise both halves and put CEC in for the full year and each half produces roughly R1.4-billion to R1.5-billion of Ebitda; run the second half forward as a rate and “you would get to roughly the R2.8-billion or R2.9-billion mark”.

With the airtime discount normalisation complete and the CEC consolidation about to annualise, FY2027 is the first year in which Cell C’s growth will have to come from the business rather than the restructuring. – © 2026 NewsCentral Media