Embattled Cell C is trying to appoint a managed services provider to handle its contract and broadband customers.
If a deal is secured, the move will enable Cell C to hold onto its post-paid customers.
Impeccable sources on Tuesday said Cell C was in talks with Comm Equipment Company (CEC), a handset financing company owned by JSE-listed Blue Label Telecoms.
Blue Label Telecoms owns 45% of struggling Cell C, and as the biggest shareholder it is leading a process to recapitalise the business.
TechFinancials sources say CEC is interested in taking over the servicing of Cell C’s contract and broadband customers.
As a managed services provider, CEC plans to subcontract Vodacom to handle its credit vetting, call centre, billing, and collections for these customers.
Asked to comment on a possible contract with CEC, a Vodacom spokesperson said via email that the company does not comment on market speculation.
This reported move by Cell C is part of its strategy to become a significant wholesale buyer of network capacity and infrastructure services.
Sources say Cell C wants to focus on delivering the right quality service to its current and future customers without being owners of capital-intensive infrastructure.
Blue Label Telecoms disclosed in its latest annual report that CEC is largely dependent on the sustainability of Cell C.
CEC provides funding for the handset element of Cell C’s post-paid subscriber contracts.
“The business model of this financing arrangement indirectly exposes the group to the credit risk of Cell C,” notes the annual report.
“All monies from the Cell C customer, including service revenue, interest charges, and handset fees are paid into an escrow account,” explains the report.
“After subtracting the CEC interest charge and handset fee, the remaining revenue is remitted to Cell C. which is responsible for any bad debt that may arise.”
CEC provides a similar service for the funding of DStv decoders.
“In the 2020 financial year, CEC decreased its interest-bearing borrowings by R950 million to a balance of R716 million as at 31 May 2020,” says the report.
Sources told TechFinancials that the move by Cell C to seek a commercial agreement with a managed services provider is aimed at pioneering the evolution of the mobile network operator space in South Africa.
This development would enable Cell C to partner with two of its biggest rivals – Vodacom and MTN – who are the two big infrastructure players in the market.
Also read: Union Asks If Blue Label Telecoms Is Using Cell C as a ‘Piggy Bank’
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This is according to Blue Label Telecoms head of investor and media relations Nicola White who was responding to questions from MyBroadband.
For more read: Vodacom’s airtime agreement with Blue Label Telecoms under the spotlight
