S. Africa’s Cell C Expects to Be Profitable Within Three Years

Cell C (Pty) Ltd., South Africa’s third largest wireless operator, plans to be profitable within three years as it seeks to gain market share from larger competitors MTN Group Ltd. (MTN) and Vodacom Group Ltd. (VOD)

The mobile-phone company has added 2.5 million subscribers in the past 12 to 15 months to give it a customer base of more than 11.5 million in South Africa, Chief Executive Officer Alan Knott-Craig said in a phone interview today. Vodacom has a market-leading 30.3 million South African active customers, while MTN has almost 25 million subscribers, according to the companies.

Cell C wants to improve its market share to between 20 and 25 percent from 12 percent now, according to Knott-Craig. “We still need to hurry up and get that other 8 percent market share,” he said. “Until then it’s playing catch up. The regulatory environment is critical.”

The Independent Communications Authority of South Africa said last month it would review mobile-phone termination rates, the amount operators can charge to carry each other’s calls, as part of its attempts to reduce the cost of mobile-phone use in Africa’s largest economy. That could lead to smaller operators paying less than the market leaders.

“The costs of communication in South Africa are still comparatively high in relation to its Southern African and continental peers,” the authority said in a statement in May.

Market Share

Cell C, controlled by Dubai-based Oger Telecom, hasn’t reported financial details since 2010, when it said full-year earnings before interest, taxes, depreciation and amortization were little changed at 1.4 billion rand ($142.6 million).

Oger Telecom, Cell C’s majority shareholder, has pledged an equity investment of $350 million to boost the company’s finances, Cell C said in a statement today. The sum is in addition to a $200 million injection by Oger in 2012 and a further “significant” amount earmarked for 2014.

“Anyone with less than 25 percent market share is going to struggle and the only people who have more are Vodacom and MTN,” Knott-Craig said. “That is a result of no regulation or soft regulation. We’re just saying regulate like the rest of the world regulates.”

To contact the reporter on this story: Chris Spillane in Johannesburg at cspillane3@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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