Jorge Mendes’ plan to ‘set the market on fire’

Jorge Mendes

Cell C has unveiled its new turnaround plan, aiming to reclaim its position as the country’s third-largest telecommunications company from Telkom. 

The plan was unveiled by Cell C CEO Jorge Mendes at a media engagement on Tuesday after briefly describing how bad of a position the company was in when he took over last year.

“We are not in the clear yet. We have been recapitalised twice now. Our balance sheet still looks like a crime scene,” Mendes said. 

The latest recapitalisation included a R1.46 billion loan from Blue Label to Cell C, which was used to repay Cell C lenders. The lenders received only 20% of their claimed loans.

Cell C’s latest results, which were shared as part of Blue Label’s annual financial statements, showed that Cell C’s revenue declined from R13.3 billion to R11.9 billion for the year ended 31 May 2023.

The reports showed that it swung from a R2.4 billion loss to a R4.9 billion profit. However, that was the result of extraneous income.

Cell C’s net profit after taxation of R4.63 billion included extraneous income of R6.90 billion related to the effects of the recapitalisation transaction.

The extraneous income predominantly related to the release of debt where secured lenders accepted 20c to the rand as part of the recapitalisation.

Cell C recorded a loss of R2.30 billion for the year when the extraneous income is excluded.

Mendes plans to turn this around by solving one of the core issues Cell C has faced since the beginning of its downward spiral – attracting and retaining skilled employees. 

“I want to have the best corporate culture in the country. I want staff retention and not staff attrition,” he said. 

This means that Cell C’s employee headcount will grow from where it is now – below 1,000 employees.

Mendes explained that key performance indicators and metrics such as revenue, profit, and profit margin will improve due to retaining talent and having a good work environment. 

“Profits will come as a result of the underlying culture and philosophy at Cell C,” he said. 

He made it clear that Cell C has no ambition to be the number one telecoms company in the country, but it certainly does not want to be last. 

The initial aim is to reclaim at least its position as South Africa’s third-largest telecoms company from Telkom. 

Cell C was South Africa’s third-biggest mobile network operator for several years, but Telkom’s mobile subscribers surpassed it in 2020.

To do this, the company aims to leverage its mobile virtual network operator (MVNO) status to be lighter and more nimble than its competitors. 

In effect, Mendes said, the company will be able to replace capex with opex by not having to build and maintain its own network. 

This will enable the company to retain its value proposition while backing it up with high-quality service. 

However, he said Cell C would not compete on pricing alone as that is a race to zero with no winners. 

The company aims to take market share away from its competitors by launching new products that are not currently offered in the market. 

Mendes said anyone can package data, calls and SMSes in a new way without adding value. Cell C, on the other hand, aims to add value by creating completely new products. 

However, it does not mean Cell C will do away with traditional products. “We’ll still do those. They’re bread and butter. You can’t have a bakery and not sell buns,” he said.

Mendes declined to give specifics about the new products, explaining that he wanted to hold onto any competitive advantage Cell C has. 

He said they should announce their first new products in a month, with many more coming to market in the next six months.

Mendes said many new products are predicated on negotiations around their wholesale and roaming agreements with MTN and Vodacom.

Although he couldn’t provide details, he said he expects to be able to announce the first of these moves in days.

“I have an enterprise offer [in the works] that will set the market on fire,” he said.