S&P Global has downgraded South African operator Cell C's debt to 'D' or 'default', its lowest possible junk rating, after the mobile operator "failed to make interest payments on certain bilateral loan facilities" due in July. The company has struggled to make consistent profits since it became South Africa's third mobile operator in 2001 and is grappling with a hefty debt burden.
The downgrade follows Cell C's announcement on 19 August that it has failed to make approximately ZAR 194 million in interest payments due in July on certain bilateral loan facilities totalling 40 percent of its debt at end-2018, the rating agency said. In response to the downgrade, Cell C said the suspension of interest payments in July is part of wider Cell C initiatives to improve liquidity and to restructure the company's balance sheet.
Cell C said it continues to work proactively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness as part of its strategic road-map. Cell C added that it has entered into a term sheet to expand the provisions of its roaming agreement with MTN, to better control its capital expenditure and operating costs.
It said an agreement will lay the groundwork for a broader national roaming agreement, supporting South Africa's policy goals of avoiding network duplication. The network services provided will drive efficiencies in the delivery of service to consumers by Cell C. The company added that the expanded roaming agreement, together with the recapitalisation transaction, will advance its path to sustainability.
