Vodacom heeds increased competition

Competition in SA's mobile industry is finally heating up, with top player Vodacom announcing a R200 million investment in “customer experience” and brand identity, as Cell C and newcomer 8ta place increased pressure on the incumbent.

Speaking during a trading update conference call yesterday afternoon, Vodacom CEO Pieter Uys noted that competition in the mobile industry has intensified with the recent unveiling of Telkom's mobile arm, 8ta, as well as Cell C's move into the mobile data game.

Not only have the two competitors come to market with competitively priced data, as well as pre- and post-paid voice offerings, but Cell C and 8ta also recently won the fight for asymmetrical termination rates against MTN and Vodacom.

This means that, while Vodacom and MTN are still reeling from the business shock of the last mobile termination rate cut in March last year, Cell C and 8ta will plough the savings back into their respective businesses to come to market with even more competitive offerings. Lower termination rates knocked Vodacom for a further R481 million in the third quarter of the financial year.

Nonetheless, Uys stated he was confident Vodacom would maintain its dominant market share. This is backed by the company's report that it bolstered its subscriber base by 2.2 million customers in the last quarter.

Frost & Sullivan industry analyst Spiwe Chireka says Vodacom's announcement indicates a positive shift towards increased competition in the industry.

Chireka points out that Cell C is consciously moving away from its focus on the low-end consumer market and slowly but surely establishing itself in the enterprise and high-end consumer market.

She adds that Cell C's rebranding exercise has proven successful as the operator has positioned itself as a serious player.

Chireka argues that, although 8ta has yet to truly “rock the boat”, Vodacom must be pre-emptive in order to remain relevant.

She notes, however, that marketing is only the first step towards a competitive environment and that Vodacom must also stay abreast of innovative services and network status.

This comes on the back of a recent showdown between Vodafone and Cell C at the Advertising Standards Authority (ASA), which may be directly linked to Vodacom's new brand identity.

Vodacom shareholder Vodafone recently lodged a complaint with the ASA against a Cell C advertising campaign, in particular for its use of the payoff line “Power to you”.

Vodafone claimed it has been using the tagline “Power to you” in the company's global marketing campaign, which included SA, since 2009.

Cell C explained that the slogan was a spin-off of the operator's campaign slogan: “The power is in your hands.”

ASA ruled that Cell C's use of the slogan exploits the advertising goodwill of Vodafone and it constitutes unlawful imitation.

Cell C CEO Lars Reichelt argues: “We are puzzled by the ASA's ruling on the use of the term 'Power to you' in our advertising, as Cell C was the first company to apply for this slogan to be registered as a trademark in SA.

“The ASA has found in favour of Vodafone, which is an international company, over Cell C, which is a South African company in our own territory even though we strongly doubt whether South African consumers would recognise 'Power to You' as being associated with Vodafone. We are studying the ruling and will decide on our next steps soon," he continues.

While it is not clearly understood why the authority ruled in favour of an international company, it is speculated that Vodacom may be adopting Vodafone's red and white brand as its new brand identity, but Uys would not confirm this during the conference call.