COMPANIES: Cell C and MTN financials tell different sides of telecoms evolution story

CEO Jorge Mendes was all smiles on Cell C’s maiden annual results call as a standalone company listed on the JSE, but the press statement may have been a little too optimistic.

News of Cell C’s 57.4% headline earnings jump has been greatly exaggerated. That headline was based on IFRS Ebitda – an accounting reporting trick that should be seen more as a reference image the company takes to the hairdresser than what the actual haircut looks like on them – of R5.5-million.

Daily Maverick wasn’t on the results announcement call, but company CFO El Kope was quick to walk back the bold declarations on the press materials, acknowledging in our interview that “all these one-offs that then happen in the year affect your net reported number”.

To address this, management presented a H2 FY26 normalised standalone view to help investors “understand what to expect going forward”. That number instead sits at R2.381-million.

Then there was another problem. Before listing on the stock market, Cell C told investors they expected to bring in R1.5-billion to R1.8-billion in spare, usable cash each year. They missed that target because the first half of the year was dragged down by paying off old, messy debts.

However, the CFO explained that things turned around in the second half of the year, when they generated R703-million in cash. If they keep this pace for a full 12 months, they will bring in R1.4-billion to R1.5-billion next year.

She also explained that they spent more than R230-million just on the costs of getting listed on the stock exchange, and gave away too many big discounts to retail agents selling their airtime.

The other big concern and a possible future block on profitability is the mobile termination rates situation where Cell C is actually paying more to other networks than it receives, because of changing customer behaviour.

“So the mobile termination rates is a bit of a tricky one because it should in some instances, if the traffic patterns don’t change, kind of be net neutral,” explained CEO Jorge Mendes.

“You reduce the revenue, you reduce the cost, but traffic patterns start changing in terms of on-net[work] off-net propositions. And so we are actually a net payer at the moment.”

Mendes said the special, protective higher rates Cell C was allowed to charge (known as asymmetry) were falling away, and a final rate cut next year would force a total reset of this revenue bucket.

Government is bringing in strict rules (the End-User Subscriber Charter) that will stop networks from selling short-term data bundles (like those lasting under seven days) and will force Cell C and other mobile network operators to let users roll over unused data.

This will reduce out-of-bundle revenues and lower data margins. Instead of fighting this in court as other operators might, Mendes says Cell C is choosing to embrace the rules because protecting consumers is the right thing to do.

For Cell C, traditional voice call traffic fell by 4%, while internet data traffic exploded by 47%.