Cell C defaulted on a R2.7 billion loan – here’s when, experts say, it will be time for customers to worry

Business Insider SA
  • Cell C defaulted on paying interest on a R2.7 billion loan which was due at the end of December. 
  • This added to uncertainty about the company's future.
  • But Cell C client should only start to worry about their service if they experience network issues - which is unlikely, analysts say. 
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This week, confirmation that the embattled Cell C defaulted on a loan added to uncertainty about the company's future. 

But Cell C subscribers should only start getting concerned about its service if they start seeing network issues, said Bryan Turner, data analyst at technology market research company World Wide Worx. This is, however, unlikely.

Cell C, with an estimated 17 million mobile subscribers in South Africa, defaulted paying the interest on a $184 million, roughly R2.7 billion, loan which was due at the end of December 2019.

Cell C in a statement said it suspended payments on its debt, which amounts to over R9 billion, in a bid to improve liquidity and to restructure the company’s balance sheet.  

Cell C CEO Douglas Craigie Stevenson said the company is currently implementing its turnaround strategy. It is cutting costs and implemented a hiring freeze. 

He said a key part in the turnaround was completing a new roaming agreement entered with MTN which would help lower costs and increase its liquidity.

A day after Cell C’s majority shareholder, Blue Label Telecoms, informed shareholders of the default, Cell C concluded a sponsorship deal with the Sharks rugby club in Durban. 

Also read: After 10 years, Vodacom, MTN and Cell C have all started locking handsets to their own networks again

Turner said Cell C’s subscriber base remains lucrative and would, therefore, be acquired by another network provider before or if Cell C liquidated. 

Cell C blocked a takeover bid from Telkom in 2019, and was in talks with Vodacom to sell its subscriber base at the beginning of January.

“Cell C users should, therefore, move over to another network before they would see network issues when the company is struggling to keep its network running,” Turner told Business Insider South Africa. "Users should start being concerned if this doesn't happen, and their network quality deteriorates."

“If Cell C did sell its subscriber base, it will, however, be very detrimental to the company as it would be selling one of its most profitable parts to cover its growing debt.” 

Also read: A new deal means Cell C clients can use MTN's network - for much cheaper than MTN users

Technology analyst Arthur Goldstuck previously told Business Insider South Africa that while financial difficulties may worry customers, they are unlikely to be affected by it.

Users should only start worrying when they struggle to connect to the network, which is highly unlikely, he said. 

“I don’t think Cell C is going to close down anytime soon. The reality is that they have a major subscriber base which is an incredibly valuable asset that is certainly not going to be dumped,” Goldstuck told Business Insider South Africa.