Cell C buyout promo stirs controversy

Bonnie Tubbs
By Bonnie Tubbs, ITWeb telecoms editor.
Johannesburg, 26 Jun 2015
Cell C has accused its rivals of treating customers unfairly, although it has been criticised for "underhanded" moves itself.
Cell C has accused its rivals of treating customers unfairly, although it has been criticised for "underhanded" moves itself.

It has been six weeks since Cell C capitalised on the opportunity to "lure" consumers away from its rivals - a move analysts said could either bite or benefit the operator - and contradictory pictures have been painted.

Cell C says its Contract Buyout promotion, which offers customers of rival networks up to R10 000 to "buy themselves out" of their existing contracts and take up a contract with the company instead, has seen "phenomenal" consumer response.

The operator says it is the promise that prices will not increase during their contract term with Cell C, in particular, that has grabbed consumers' fancy. "Consumers' response...has been phenomenal and has exceeded our expectations."

Cell C says the demand has been such that it is very likely it will extend the buyout promotion, which was initially set to end on 30 September. While it declined to provide numbers at this stage, it says it will "consider disclosing numbers [of customers that have taken up the promotion] at the end of Q3".

However, Vodacom - SA's largest mobile operator with 4.9 million active contract subscribers as at 31 March - says the number of customers that have bought themselves out of their Vodacom contracts to take up Cell C's promotion is "negligible".

Vodacom spokesperson Richard Boorman says, from what it has experienced, "people who do look into the [Contract Buyout] offer find they will be no better off financially and in a worse position in terms of network coverage and performance".

Cell C's Contract Buyout offer drew a reaction from online commentators soon after it was introduced on 13 May, with some suggesting the operator use the money it proposed to "buy" customers for network investment instead.

Industry watchers lauded the move as cutthroat, but said the proof of the pudding would be in the eating. About two weeks after launch, closer inspection revealed the "Epic" tariffs associated with Cell C's buyout offer were "incredibly confusing" - to the point of being misleading.

'Deliberate' obstacles

Meanwhile, Cell C has accused "some of the other network providers" - which it declined to name - of deliberately preventing customers from cancelling their contracts with them by charging "excessive and unreasonable cancellation penalties".

"While the Consumer Protection Act (CPA) allows network providers to charge a reasonable cancellation penalty when customers wish to terminate their contracts early, Cell C has been made aware of certain instances where some of the network providers are charging customers more to cancel their contracts early than to stay in their contract for the full term," says Cell C.

"This means customers who are unhappy with their current network provider and wish to move to Cell C have to pay for future services they will never receive.

"In some instances, customers are required to pay the full service or subscription fee for the remaining months of the contract plus an additional early termination charge to leave the network provider."

Cell C says, while it understands network providers must recover the cost of the handset, unreasonable charges for future services that the customer will never receive is in contravention of the CPA. "Cell C believes this does not constitute a reasonable fee."

The CPA does not specify what a "reasonable fee" is.

Cell C says it only charges customers the outstanding handset amount when they cancel contracts, without charging subscription fees for the remaining contract period or any additional early termination charge.

Vodacom says its cancellation terms are CPA compliant and "there are no circumstances under which we'd end up 'charging customers more to cancel their contracts early than to stay in their contract for the full term' (Cell C's words)".

'Delay' tactics

At the same time, Cell C has also accused "certain network providers" of using "delay tactics" to put customers off terminating their contracts early.

"Some customers have complained their current service provider will only allow them to port out to Cell C once their account has been fully settled. In addition, some customers have been told they first need to cancel their existing contract before their number will be released for porting purposes.

"The Mobile Number Portability Regulations set out specific grounds where a network provider may reject a request to port to another network. The reasons provided by some of the service providers are not listed grounds in terms of the regulations, and rejection of a request to port based on such grounds is in direct contravention of these regulations."

Describing its process, Vodacom says: "On request from the customer, a premature cancellation quote is generated. To proceed with the cancellation, the customer must sign off the quote and settle the account. On receipt of the payment, we'll contact the customer to find out if the number should be cancelled or converted to prepaid."

Telkom says it does not prevent customers from leaving its network. "The 20 business days written notice rule is within the CPA guidelines." The operator says it has a set formula for the calculation of the customer's final bill. "We charge an R800 admin fee for early termination irrespective of the original term of the contract; 12, 24 or 36 months. The customer is liable for the balance of device portion for the remainder of the contract.

"We do not factor in the service fee for the remainder of the contract, at the time of cancellation, as customers should not have to pay for the balance of the service they are not going to use."

Telkom says it believes this is a "reasonable and fair business approach based on the value built into contracts at the inception of those contracts".

Chief customer experience officer at MTN, Eddie Moyce, says the operator complies with the CPA with regard to contract cancellations. "Customers have the option to cancel a contract at any time on 20 business days' notice. MTN has reasonable cancellation fee which is in line with the CPA and regulations."

To the rescue

Cell C says, "as the consumer champion", it will assist customers who want to join its network but are unable to do so due to the unreasonable fees charged by their existing network providers, or unfounded reasons provided by the service providers for rejecting the port requests.

However, Cell C's move to increase its own prices in December - as well as changes to its billing systems that resulted in consumers paying more for data in mid-2014 - has led some to question the company's once solid "consumer champion" reputation.

Analysts have also pointed to a reversal of roles in the telecoms landscape, with Telkom Mobile having now emerged as consumer champion, while Cell C deals with the growing pains its two larger rivals have faced, including a balancing act between subscriber growth and network investment.