Embattled mobile phone operator Cell C is facing significant liquidity constraints, a notice of retrenchment shows.
Cell C is in the process of retrenching its workforce. For more read: Debt-Ridden Cell C Serves Retrenchment Notices to 2500 Employees
The notice seen by TechFinancials details the reasons for the retrenchments.
It states that Cell C has consistently under-performed and generated as much as R33 billion in losses over the years including a R4.2 billion loss in 2019 versus R7.3 billion in 2018.
“The company is currently facing significant liquidity constraints which have resulted in it defaulting on its obligations to lenders, shareholders, and creditors,” read the notice.
“The biggest obstacles have been brought about by a combination of the rapidly changing and competitive operating environment, a recapitalisation in 2017, which burdened the business with unsustainable debt without right-sizing and repositioning of the business for sustainable performance; an increase in the headcount of the business over the years.”
In January, Blue Label Telecoms – which owns 45% stake in Cell C – said the struggling mobile operator defaulted on the payment of interest on a $184 million (R2.7 billion) loan, which was due in December 2019, along with interest and capital repayments related to bilateral loan facilities with Nedbank, China Development Bank, the Development Bank of Southern Africa and the Industrial and Commercial Bank of China.
Blue Label Telecoms and Net 1 have written down to zero the value of their stake of the embattled mobile network, Cell C, which last year reported an R8 billion loss in the year to June, hit by impairments.
Also read: Cell C: A Hodgepodge Going Nowhere
The cash-guzzling operator lost 2.9 million subscribers for the year ended December 2019. Cell C also declared a loss of R3.94 billion compared to R7.36 billion in 2018.
The company also recently got a lifeline after the Competition Commission recommended conditional approval of the proposed acquisition of certain Cell C assets by special purpose vehicle Gatsby SPV. Gatsby is a ring-fenced newly incorporated special purpose vehicle which was incorporated for the sole purpose of entering the proposed transaction.