Mobile operator Cell C on Tuesday received a $350-million (R3.5-billion) equity investment from its majority shareholder Oger Telecom and announced that it had concluded a long-term financing package of R2.2-billion with key lenders, including Nedbank and the Development Bank of Southern Africa.

Cell C CEO Alan Knott-Craig indicated that the combined funding would provide the company with a sizeable pool of liquidity to continue investing in its network quality, customer base and product offerings.

The funding structure also ensured that the company maintained an appropriate capital structure and balance sheet to sustain its drive to offer compelling tariffs and services to its customers.

“Our customer base has grown by 2.3-million over the last 12 months from a base of nine-million in the previous ten years [to over 11.5-million]. Together with that, the traffic has doubled over the last year or so. So, we have been building a huge amount of capacity into the network, especially in Johannesburg,” he told Engineering News Online.

Oger’s latest equity investment was in addition to the $200-million equity invested in 2012. A further significant investment was scheduled for 2014.

The cash injection followed the Independent Communications Authority of South Africa’s (Icasa’s) announcement in June that it will conduct a market review of the remedies proposed under the call termination regulations and other programmes aimed at reducing the high costs to communicate in the country.

“Icasa’s decision to conduct a market review of the remedies under the call termination regulations has bolstered our shareholders’ confidence in the future of Cell C and the industry...but Cell C needs aggressive and proactive regulatory support to continue its drive to reduce the cost to communicate in South Africa and remain sustainable in the process,” Knott-Craig said.

He noted that there were a number of possible remedies, of which the most important were aggressive and sustained asymmetry, mandatory flat rates and lower mobile termination rates for operators with significant market power.

He added that the cost of communication in South Africa could not be reduced if the cost structure currently used in the local telecoms industry was not changed.

“The biggest problem to the cost structure is the mobile termination rates. Therefore, the mobile termination rates for the big players have to be reduced drastically from where they currently are. Some are even suggesting that they should be zero,” Knott-Craig stated.

“With this financial injection and a regulatory outcome that promotes sustainable competition for smaller players, Cell C will lead the way in lowering the cost to communicate and further expand its network coverage,” he added.

Cell C and Oger Telecom chairperson Mohammed Hariri said in a statement that the companies were confident that the regulator would make decisions that improve smaller players’ chances of being sustainable competitors.

Further, Knott-Craig pointed out that Cell C’s shareholders have indicated a willingness to inject further equity in 2014, if, as anticipated, the review by the regulator facilitated a more competitive industry where smaller players could remain sustainable.

“That is, to a large extent, going to depend on the regulatory review. South Africa has to prove itself to be investment-friendly… it is not attracting its fair share of foreign investment in terms of telecommunications,” he urged.

Meanwhile, Frost & Sullivan information and communications technology senior industry analyst Gareth Mellon told Engineering News Online that Cell C had, to date, been relatively successful in attracting price-conscious customers, to the extent that its market share was currently above 10%.

“However, this segment does not generate significant profitability and the ongoing price wars in the market will only exacerbate this,” he said, while noting that the recent price reduction by Telkom Mobile provided an example of this.

He stated that Cell C would need to focus on increasing its coverage and network quality, as well as creating packages that might attract higher-revenue client groups.

“The challenge is to change the market's perception of low-quality network infrastructure,” Mellon pointed out.