SA's third cellular operator, Cell C, has fired the first pricing salvo in the enterprise space in a bid to grow its market share, launching a least-cost routing (LCR) service that drops mobile calls as low as 99c a minute.
The move is expected to be met with similar offerings from the other mobile operators, which will lead to cheaper voice costs for corporates in SA. The prohibitive cost of communication in SA is an aspect government has vowed to tackle for several years.
Cell C's LCRAnyNet product will cost a minimum of R150 a SIM per month and will provide a flat rate of 99c across mobile networks and 60c to fixed-line networks.
Increased competition
“LCR AnyNet will reduce the cost of telecommunications for business and will bring down the barrier to entry for small businesses hoping to take advantage of least-cost routing,” says Alan Knott-Craig, who took over as Cell C CEO last month.
Knott-Craig says that small businesses have previously been excluded from the benefits of LCR, due to the high monthly subscription rates associated with the service. He explains the product allows customers to make calls to all the major networks at a very competitive rate and eliminates the need to have multiple operator SIMs.
The offer aims to grow Cell C's market share and also to position it as a “meaningful partner” to the small and medium companies in SA, says Knott-Craig. “Cell C hopes to become a strong competitor in the LCR market.”
Price war
Huge Group CEO James Herbst says Cell C's service is a “game changer” at the pricing level. “It's a massive move.”
Huge Telecom, the principle subsidiary of the listed group, is the largest LCR company still standing, as others like Vox, Autopage and Nashua have shifted to voice over IP. Many commentators have said LCR is dead, because of lower interconnection fees, introduced by the Independent Communications Authority of SA, which eroded LCR margins.
Knott-Craig says reliable VOIP solutions require access to fixed broadband access in the form of ADSL or fibre. The limited fixed broadband infrastructure and the need for quality voice calls makes Cell C's offering “very relevant”, he adds.
“We have consistently maintained that market forces will drive down wholesale cellular prices to a point where they are on a par with or better than wholesale fixed-line prices. Quite simply, in Africa, cellular technology is the hero of the present and the way of the future,” Herbst says.
Herbst says Cell C is going after the corporate market with its offering, which is expected to be the first of many. He notes that the offering to the wholesale segment undercuts other players like Telkom and Neotel's standard retail corporate telephony offerings and introduces another player into the corporate segment.
Cell C's new GSM price offering is better priced than the retail corporate telephony offerings of the VOIP operators, says Herbst.
Other operators will have “no choice” but to launch a counter offering, says Herbst. The increased competition will eventually filter down to end-users, benefiting them through cheaper voice costs, he adds.
A wholesale price war between the telecom operators will serve to drive down wholesale input costs for service providers, explains Herbst.
Temporary plan?
Wayne Duvenhage, executive for strategy at Altech Autopage-ATC, says the move will push prices down and he expects the other operators to react. However, he does not see it as a game changer as it is part of a basket of offerings that includes VOIP.
Andy Openshaw, MD of VOIP player Nashua-ECN, says while Cell C's move is an “interesting ploy,” it will only fill a niche for small LCR customers. He says it cannot compete with a high-volume VOIP solution and “does not impact on the demise of LCR”.
LCR was a “good cow to milk,” but its time has come, says Openshaw. However, he adds that even if Cell C only runs the promotion for a year or two, it will pick up minutes it would otherwise not have had and gives it access to the enterprise space.
Richard Hurst, Ovum's emerging markets analyst, says he has heard rumblings that LCR is dead, but Cell C is in a different situation as it owns its own infrastructure. “It's like owning a toll road, you can determine the toll.”
Hurst says Cell C's move will make prices in the corporate segment more competitive “without a doubt”. He says the offering is a “good play for the enterprise segment,” which has been holding out for price relief for some time.
It does not matter how the traffic is transported as all voice and data will become IP-based, says Hurst. What is important to end-users is the quality and price. He expects other operators to beef up their offerings.
Share