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Markets News

CORRECTED-UPDATE 1-South Africa's Cell C losses widen as hunts for profitable customers

(Corrects Oct.20 story to show that CEO’s surname is Craigie Stevenson, not just Stevenson)

JOHANNESBURG, Oct 20 (Reuters) - Cell C reported a 7.6 billion rand ($461 million) loss and saw subscriber numbers tumble in the first half of the year as South Africa’s fourth-biggest mobile operator tried to shift away from unprofitable customers to boost returns.

In a sign the strategy may be starting to work, annualised average revenue per user (ARPU) from prepaid customers rose 27%.

Chief Executive Douglas Craigie Stevenson also told analysts that subscriber numbers had begun moving up again, as the company returned to putting more attractive offers into the market.

Cell C, in which telecoms firm Blue Label owns a 45% stake, is switching strategy after chasing subscribers with cut-price deals that only attracted them for a short while.

“The relative cost of maintaining and acquiring those subscribers and its revenue compared to its direct capital expenditure was problematic,” Craigie Stevenson said.

“We took a view that we want to free up our network capacity, ensure we have the right return on the subscriber.”

In the six months to the end of June, Cell C’s prepaid subscriber base decreased by 35%, while contract and broadband subscriber numbers fell 14% and 19% respectively.

Overall subscribers fell to 11.7 million from 16.2 million.

Total revenue for the six months fell 8% to 6.9 billion rand, including a 6% drop in service revenue.

Losses widened from 875 million rand a year earlier due to one-off impairment and restructuring costs of 5.5 billion rand, as well as a weaker rand.

Normalised earnings, however, were up 64%.

“The last six months show the early signs of recovery. Our earnings are up, our margins are stabilising and there is a strong single-mindedness on cutting additional costs,” Craigie Stevenson said.

$1 = 16.4976 rand Reporting by Nqobile Dludla Editing by Promit Mukherjee, Mark Potter and David Goodman

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