'Telco models have to change'

The models that telecommunications companies have been employing over the past decade since ICT infrastructure started to take shape in SA have to change, if the country is to see a major reduction in the cost of communications.

This is the stance of Vodacom founder Alan Knott-Craig Snr, who officially steps up as third cellular operator Cell C's CEO on Monday.

Addressing an audience of industry observers, co-workers and media at a charity event this morning, Knott-Craig said telcos have to start collaborating in terms of physical infrastructure if the industry is to reduce costs, which he intimates could see as much as a 75% drop.

“We cannot continue to build four networks for four telcos in SA.” He says this tactic uses four times as many resources and is one of the factors that drive data and voice prices up. Now, says Knott-Craig, the time has come to exploit a “getting together of minds.

“The rules of the game must change. [Building independent infrastructure] is all ego stuff and was great back in the day when telcos were fighting for market share, but that is no longer the focus. With a churn rate of 40% per year, it's not that difficult to get market share, particularly in SA.”

data in SA, Knott-Craig addressed the issue of spectrum, saying it is “the single biggest factor in the cost of communications”.

He says, with the proliferation of data-hungry devices and users, comes a need for government to reconsider policy and regulation regarding spectrum allocation. “Demand for data at this point in our lives simply exceeds supply.” But, he says, it is very easy for prices to trim down when the converse is achieved.

To this end, Knott-Craig asserts that spectrum should start being allocated to people who can actually use it, as opposed to giving it to those who don't know what to do with it.

“We have to have a comparable network in terms of coverage.” He says equilibrium must be reached between dominant and smaller players in terms of spectrum, and suggests a shift of customers onto spectrum allocated to the latter. “The industry cannot be sustainable with too few dominant players and too many small ones who all have access to the same amount of spectrum.”

Knott-Craig concluded by saying he was taking the reins at Cell C “for fun”, and with an explicit and “very possible” goal in mind - to grow the company's market share to 25%.

“[This amount of market share] is genuinely needed to be a sustainable telco in any country. Can this be reached in three years? Well, 24.5% is also fine, so is 26%. This next three years will be successful [for Cell C]. Failure is not an option.”

Cell C's current market share sits at about 13%, says Knott-Craig. First and second cellular operators, Vodacom and MTN, hold 48.9% and 35.4% of the market respectively, with the latest addition to SA's mobile pool, 8ta, holding just 1.9%.