The appointment of telecommunications luminary Alan Knott-Craig Snr as Cell C's new CEO yesterday has been met with great expectancy and anticipation of what the future may hold for SA's third cellular operator.
Knott-Craig's reputation precedes him. Industry observers and professionals say the former Vodacom CEO brings with him a wealth of experience and knowledge second to none, and there seems to be a consensus that he is undoubtedly the right man for the job.
ITWeb spoke to analysts to gauge what kind of future they foresee in the highly-competitive market that Knott-Craig re-entered yesterday.
Golden touch
Frost & Sullivan research analyst for telecommunications in SA Iyembi Nkanza says, given Knott-Craig's track record, “he may be the man with a golden touch”.
“Alan Knott-Craig's introduction will add an edge to Cell C's strategy going forward. He has likened the challenge to starting Vodacom, only this time he has a client base of 10 million. His years of experience in the industry will undoubtedly bring a revitalising energy back into the brand and have a positive effect on the bottom line.”
Nkanza points out that, under Knott-Craig's leadership, Vodacom went from a R1.15 billion company in 1993 to a R50 billion per annum business in 2008.
Richard Hurst, Ovum's emerging markets analyst, says Knott-Craig's appointment is a “magnificent thing” for the company and the industry at large. “Not only does he bring industry knowledge, but also a passion for the sector and a desire to see it grow and be a meaningful contribution to the lives of every South African and the South African economy.”
Curbing competition
Analysts say the appointment of Knott-Craig has caused the industry to “sit up and take notice”.
Frost & Sullivan says it foresees increased competition from smaller players like Cell C and 8ta, which will pose a greater threat to market leaders and ultimately benefit the consumer.
According to the research firm, Cell C currently has a market share of 15.4%. After 10 years in the market, it offers network coverage to approximately 35% of the South African geographic area and reaches more than 92% of the population.
“This is no small feat,” says Nkanza.
“The brand has stood up against the major players to claim a respectable market share. However, even though Cell C can boast some victories, the service provider would need to streamline costs further to continue growing.
“MTN and Vodacom are firmly entrenched in the market. Both companies boast strong client bases, advanced infrastructure and experienced management. They might not feel threatened, but the news will certainly make the industry look at Cell C's strategy over the next 18 months with keen interest.”
Hurst says it is safe to assume Knott-Craig will focus on competing aggressively in the market space, which implies the company will be going after market share in the mobile space. “That is the share currently held by the two large entities, Vodacom and MTN as well as the mobile wireless broadband space, which would see a wedge being driven into the markets of Telkom SA, in particular 8ta and Neotel.”
World Wide Worx MD Arthur Goldstuck says Knott-Craig's challenge is steeped largely in gaining market share. He says, in pursuing this, the industry can rest assured that Knott-Craig will “go for the jugular”.
“He understands the regulatory environment and if the regulators don't have their act together, then woe betide them.”
The opportunity for Cell C stealing market share away from its rivals lies in the churn rate of SA's cellular industry, Goldstuck adds. He says every year a large percentage of South Africans switch networks, which is where the potential lies for Cell C and fourth cellular operator 8ta.
Future forays
Goldstuck says the challenge Knott-Craig faces now requires comprehensive marketing and an acute focus on levelling the regulatory playing field, where industry giants Vodacom and MTN currently reign.
“The entire operational structure of Cell C will have to be streamlined if the company is to get ahead in terms of market share.”
Goldstuck says we can probably expect to see a multi-faceted approach to the ultimate goal of securing market share.
“The pricing structure will most likely be adjusted, efficiencies of the organisation of Cell C revised, and operations and profitability targeted.”
Nkanza says the introduction of an industry pioneer will “add another twist to Cell C's story”.
Former Cell C CEO Lars Reichelt reiterated that driving competition and innovation would remain a key strategy to provide affordable Internet in SA, and Frost & Sullivan says Knott-Craig will no doubt continue in the same vein. “He brings with him a wealth of experience and a keen fundamentalist focus that will surely revitalise the company, and shake up the industry.”
Knott-Craig has expressed that he is not interested in marketing at this point, but that the key focus is going to be improving Cell C's network quality.
In light of this, and considering that the increasing use of smart technology will continue to boost demand for high-speed data, “Cell C will have to invest in a capable network to offer the 'sexy products' that consumers demand.
“This will be a dramatic change from Cell C of the past known for making bold statements in the media, some of which they were forcefully made to retract. The focus will shift to providing the customer with quality services in order to build on the 8.2 million customer base.”
Nkanza refers to the sale of 1 288 towers to ATC in 2010 for $200 million. “[This] streamlined the business by reducing capex.”
He says more of this is expected. “We expect to see a continuation of such strategies coupled with increased investments in technology.”
Competitors yesterday welcomed Knott-Craig's appointment and return to the industry. Vodacom CEO Pieter Uys tweeted: “Congratulations to Alan. Competition is always good. Looking forward to working with all in telecoms industry to shape future.” (sic)
MTN SA MD Karel Pienaar said: “MTN welcomes the appointment of Alan Knott-Craig as the CEO of Cell C, and wishes him success in his new role.”
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