While SA's third operator, Cell C, seems to be edging in on the mobile market - dominated by Vodacom and MTN - the proof will be in preservation of its growing customer base.
This is according to analysts and comes on the back of Cell C's announcement yesterday that it had signed up a record number of subscribers - over a million - during the month of July.
"I am exceptionally proud and excited to announce that, for the first time in the history of Cell C, we have connected more than one million customers in one month. Last night, we broke through the million gross connection barrier, bringing our total customer base to over 11.7 million," says Cell C CEO Alan Knott-Craig.
Out of the one million new sign-ups, however, 662 000 churned away from the network - resulting in net additions of 338 000.
Knott-Craig concedes churn is "still high", but says he is encouraged by Cell C's steady growth.
Relative churn
World Wide Worx MD Arthur Goldstuck notes that, while Cell C's churn rate is "exceptionally high", it is not that much higher than the typical industry rate of 44% to 45%. The industry churn, says Goldstuck, is constituted primarily by prepaid numbers.
Africa Analysis analyst Dobek Pater notes the 66.2% churn figure is lower than it has been in the past and says SA's prepaid churn rate is characteristically high.
While the company's churn rate is higher than the larger operators - which Pater says hovers around 50% to 60% ? "apparently Cell C's churn has been as high as 80% in the past".
Prepaid churn rate in SA, he notes, is very high. "It increased with the onset of heavier price competition and promotions."
He says, in terms of how numbers reflect success for Cell C, it all boils down to net additions. "The gross additions are less significant, although some revenue is generated from gross additions through, for example, device sales. If Cell C's net additions are growing in absolute numbers, or as a percentage of gross additions (ie, churn is decreasing) then it is positive for Cell C."
Market share shift
Goldstuck says the market does seem to be swaying towards Cell C, but the operator will need to hold on to new customers if it is to succeed. "It looks like they will gain market share quickly; 338 000 [net] subscribers in a month is still very significant and it does indicate [Cell C] is in a strong position for growth. The question is if they will be able to hold on to the market."
Pater says Cell C may well gain more market share. "Theoretically, over the long term, the market share should even out between the various players (for example, with each one having around 32% ? and 8ta/a fourth player the small balance).
"However, this varies based on a number of factors. Vodacom and MTN are not likely to give market share away without a fight and they have more resources than Cell C."
He says Cell C would need to do something amazing - "or the others would need to seriously blunder" - for market share to shift dramatically from the current position.
Goldstuck attributes the wave of customers moving to Cell C to the company's "dual appeal" of cheap rates and simplicity.
Pater says: "Cell C is not the only one offering 'great deals', but probably makes the most noise about its consumer champion status.
"The question is whether Cell C provides long-term value to the customers, or are we going to witness an ongoing treadmill with high churn rates into the future, based on price-based purchases."
Goldstuck says "the effect soon wears off" for many joining Cell C's network, who churn to other operators again. "I can't be sure, but I think this is due to quality problems. There have been a number of complaints concerning the quality of [Cell C's] network."
He refers to a tweet he posted yesterday announcing the news that Cell C had signed up a record number of customers, saying it elicited a largely negative response, with micro-bloggers complaining about "patchy coverage" and "low bandwidth speeds".
At the end of the day, says Pater, an operator gains greater value from developing loyalty among its customers and retaining them on a long-term basis.
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