This is according to industry experts, upon reviewing the terms and conditions associated with Cell C's Contract Buyout offer, which it introduced last Wednesday with the claim: "We'll give you up to R10 000 to help you buy yourself out of your contract."
Cell C's Contract Buyout entails customers who have contracts with Vodacom, MTN or Telkom Mobile first buying themselves out of their contract (paying the designated termination fee, plus amount owing on the associated device) upfront.
Thereafter, a customer has to trade in their device with Cell C and produce proof of cancellation from their previous provider. Depending on the Epic package chosen, customers will be given a "Value Card" loaded with an amount of money as determined by Cell C, which they can use anywhere in SA where MasterCard is accepted. The card has no security features and is bound to an expiry date and customers cannot use it to draw money, or exchange it for cash.
Cell C CEO Jose Dos Santos said last week the operator would "give customers up to R10 000 to help them buy themselves out of their contract should they want to move to Cell C but still have an outstanding value to settle before they can cancel". This statement has been labelled misleading, as customers cannot use the value on the card to pay the termination fee directly.Tariffic CEO Antony Seeff says it is "interesting" Cell C is providing customers with a value card loaded with the buyout value. "This card will ultimately expire and may not be used for cash withdrawal, so Cell C is banking on a lot of ‘breakage' on customers who don't use the full value of the card before it expires."
The value card is valid for a period of three years.
World Wide Worx MD Arthur Goldstuck says the way Cell C has chosen to pay out means "risky business" for consumers. "[Customers] must go in with eyes wide open. In effect, it is like cash back, but you have to spend it on the card, which may prove to be a burden to customers who have already spent the cash to buy themselves out of their contracts. Yes, they get the value back, but not in the way they may have hoped.
"More to the point is the question: is Cell C taking a risk or is it in fact that they are transferring the risk to the customer without the customer realising it?"
Seeff points out the Epic deals linked to the Contract Buyout promotion are SIM-only, "which means that (a) if you choose to get a new phone with the packages, you'll most likely have to pay the full amount for the phone, over the 24 months (without any subsidy from the network); and (b) that the network is using the subsidy it would have normally allocated to the package to go towards the ‘buyout' fee."
Cell C spokesperson Karin Fourie says, depending on the package the customer opts for, subscribers may get a device subsidy. "The higher up you go [in terms of the value of the package you take] there is some sort of a subsidy."
Goldstuck reiterates Cell C's latest offer could turn out to be a good deal for certain consumers, but says the operator ultimately has its eyes on its own prize – that of grabbing the one million-odd contract customers that are up for grabs from Vodacom and MTN.
According to Vodacom's latest financial results, released today, the company has seen a 9.2% churn rate on its contract base. Goldstuck points out that, with 4.9 million contract customers, this means around 500 000 subscribers are going to churn in the coming year. "It's not a massive base, but it is a very healthy market to attract. We will probably see a similar number looking to churn from MTN."
While much of the churn is likely to take place between Vodacom and MTN, Goldstuck says there are, at the end of the day, one million contract customers up for grabs – and Cell C's buyout offer is one way to make sure the company gets in on some of the action.
Cell C lost much of its status as consumer champion last year, when it introduced two changes to its data billing – both of which meant higher bills for Cell C data users. In December, the operator introduced mid-contract price hikes as part of a "rationalisation of [its] products".
Cell C's Contract Buyout promotion terms and conditions promise customers who take up the associated Epic contracts that "the prices you pay during your contract term will not change for two years".
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