Subscribe

Cell C in 15-year roaming deal with Vodacom

By Phillip de Wet, ,
Johannesburg, 10 Jul 2001

Cell C yesterday announced that it had signed a roaming agreement with Vodacom after nearly four months of negotiations with both Vodacom and MTN.

"In the final analysis, Vodacom offered us superior terms which matched our business plan requirements," said Cell C CEO Talaat Laham.

Financial details and the formula for calculating fees were not disclosed, with Vodacom saying only that it was a complicated agreement from which it expected to profit directly.

The deal is to run the full 15 years of the initial Cell C licence, a term Vodacom CEO Alan Knott-Craig described as "quite unprecedented in the world". That duration is despite Cell C`s roll-out of its own network. Cell C says the duration was decided on as MTN and Vodacom will continue their own network roll-out, with Cell C "forever trying to catch up".

Cell C customers will use Vodacom capacity mostly in rural areas, as Cell C expects to have its GSM 1 800 network deployed in Johannesburg, Pretoria, Durban, Bloemfontein and Port Elizabeth through the 550 base stations to be erected by year-end. The 1 800 MHz spectrum to be used in these areas will serve more users for each base station than the 900 MHz currently in use, and will also provide higher throughput rates for data services.

Knott-Craig said Vodacom will not only profit financially from the deal, but will benefit from a stronger cellular industry when it comes to regulatory matters. He believes that a third player in the market is fundamentally important as it will add another voice when negotiating with the Independent Communications Authority of SA (ICASA) on matter such as interconnection and spectrum fees. "For Cell C to be powerful it must be successful," he said.

Cell C expects to be the first operator to use 1 800 MHz in its network, with a frequency spectrum licence expected by the end of the month. However, Vodacom may not be far behind. Knott-Craig said it would take around three months to roll out 1 800 MHz use in areas such as Johannesburg once spectrum had been allocated. The cost of an 1 800 MHz overlay network is estimated at between R2 billion and R3 billion.

The Telkom hurdle

The next hurdle for Cell C is to negotiate an interconnect agreement with Telkom. The amount of money Telkom pays over every time one of its subscribers dials an MTN or Vodacom number has long been a sore point between the three operators, as the deal is skewed in favour of the cellular companies. Telkom has attempted to force a re-negotiation of the agreement, but it has been blocked as MTN and Vodacom cling to the additional source of income for as long as possible.

Cell C expects a similarly sweet deal, most probably on the exact same terms as its competitors.

"Cell C has the right to an interconnect agreement [with Telkom] on the same terms as MTN and Vodacom," said Paul Duane, chief advisor to Cell C. Those agreements, on the other hand, provide that Telkom may not discriminate against the incumbents by offering a better deal to another party, and Telkom is not expected to offer any more than necessary.

Telkom has been testing a system to circumvent the agreement. Dialling 1007 from any Telkom phone accesses a voice response system, which routes cellular calls internationally using voice over IP (VOIP). International calls are handled under a different interconnect regime and Telkom is expected to offer its clients cheaper rates for using the 1007 option.

Telkom says the system is in an internal trial phase and various options are being considered but none have been decided on.

900 MHz to stay in use

Once its urban network is in place, Cell C will roll out coverage in rural areas to wean itself from the Vodacom network.

Knott-Craig said Vodacom would be willing to give up a portion of its spectrum in the 900 MHz frequency in rural areas, identified as unneeded, for use by Cell C, but that it could not consider doing the same in urban areas. He said that in cities the possibility could have been considered a year ago, but that the investment Vodacom has since made to maximise capacity in cities has been huge and cannot be discarded.

MTN has also professed a willingness to give up some of its current scarce spectrum as and when 1800 MHz is handed out. ICASA is required to endorse any spectrum deals between operators.

Knott-Craig also reiterated pleas that the operators not be subjected to steep licence fees for access to 1 800 MHz, saying doing so would not only delay the introduction of high-speed data services, but could prevent higher 'teledensity`.

"Neither for Vodacom, Cell C or MTN should so much money be taken out of the system. Whether we call it spectrum fees or call it something else, it will do the industry harm," he said.

Related stories:
At what price Cell C spectrum?
Cell C gets licence to thrill
Cell C network to be ready by Christmas

Share