According to S&P this is due to Cell C securing 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.
“In our opinion, Cell C’s business risk profile is primarily constrained by its relatively weak market position as the No.3 operator in South Africa’s mature four-player mobile telephony market,” S&P said.
“We understand that Cell C’s strategy involves sizable investments in its network and operations. Management hopes that these investments will enable the company to increase its market share to at least 15% over the next three years and rapidly increase revenues and EBITDA from 2015,” it said.
S&P said it expects Cell C to improve revenue growth over the next three years.
“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, in our opinion.
“If Cell C obtains additional funding sources, we believe it will continue to expand its market share and improve margins, although we do not expect the company will achieve breakeven before 2017,” S&P said.