Why Cell C ditched wholesale fixed-LTE business
SA’s third biggest mobile operator, Cell C, says the provision of wholesale fixed-LTE services was no longer profitable and impacted the quality of its network.
This after the company this week said it is exiting the wholesale fixed-LTE business, which it provided via Internet Solutions.
The mobile operator says it is in the process of reviewing its full product portfolio.
“Over this period, the competitive landscape has changed substantially,” says Cell C. “The provision of the service was no longer profitable for Cell C, and while another competitor may be willing to offer it at a similar or lower price, Cell C does not believe it is sustainable.”
Furthermore, Cell C says: “In short, via the Internet service providers, less than 0.5% of Cell C’s total customer base were using 20% of Cell C’s data network capacity. This was having an impact on the quality of the network for all other Cell C customers.”
The mobile operator says Internet Solutions (IS) was given the required three months’ notice of Cell C’s move.
“The decision has been made based on sound business principles and is in no way linked to Cell C’s debt.”
IS confirmed to ITWeb that it had received a formal notification from Cell C terminating its fixed-LTE services, which stated the decision would affect its reseller partners and their respective end-users, as it is no longer sustainable for Cell C to support the demand that fixed-LTE has placed on its network.
An IS spokesperson says: “We are working tirelessly with alternate network providers to secure comparable fixed-LTE services, with the aim of successfully on-boarding a new operator that will allow us to continue providing these services to clients.
“We have been in direct communication with our clients, advising them of the particular details of when these changes will become effective.”
With LTE being faster than 3G, users experience faster online gaming, video streaming, music and app downloads using the technology.
Long-Term Evolution (LTE) is a standard for wireless broadband communication for mobile devices and data terminals, and it increases the capacity and speed using a different radio interface together with core network improvements.
Analysts say the decision to terminate LTE services is a reflection of the financial challenges at the telecommunications company.
“The decision is certainly linked to financial distress in the company, as Cell C is probably unable to commit sufficient capex to expand the capacity of its LTE infrastructure to satisfy both fixed- and mobile-LTE customers,” says telecoms analyst Dobek Pater from Africa Analysis.
“While it can roam on MTN’s infrastructure to provide mobile services, which helps Cell C with its own capacity constraints, fixed-LTE services need to be provided on Cell C’s own infrastructure, which may be suffering from constraints.”
Earlier this month, Cell C finalised a national roaming agreement with MTN, which it says is mutually beneficial to both parties.
However, reports emerged saying Cell C was struggling to make payments to MTN.
According to Pater, if Cell C’s network capacity is really very constrained, “we will see Cell C terminating the fixed-LTE products altogether, including its own retail sales, in the near future”.
SA’s third largest mobile operator insists its turnaround strategy is in progress, despite damning news coming week in and week out.
Last week, ratings agency S&P Global downgraded the telco to “default” status after failing to make interest payments in July.
“The downgrade follows Cell C's announcement on 19 August that it has failed to make approximately R194 million in interest payments due July 2019 on certain bilateral loan facilities totalling 40% of its total debt at 31 December 2018,” said S&P.
SA’s third biggest mobile operator has been under pressure for some time and continues to face a myriad of challenges.
Peter Takaendesa, portfolio manager at Mergence Investment Managers, says: “This [LTE] is an area not suited for Cell C at the moment, because it is capital-hungry and it doesn’t support their balance sheet. I think it is the right decision.”
Pater believes the mobile operator is not terminating its LTE services completely, saying the company will continue to provide mobile-LTE services.
“If it were to terminate LTE altogether, it would regress significantly and may as well close shop. Cell C is also able to roam on the MTN LTE network to provide mobile LTE services. There is a significant difference between mobile and fixed-LTE in terms of the quantity of data consumed by a terminal device and also ARPU.”
He explains further: “Given Cell C’s limited capacity on the LTE broadband network, the operator would rather sell fixed-LTE products (which typically account for far greater data consumption – and, therefore, traffic levels on the networks – than mobile-LTE usage) on a retail basis for higher prices than wholesale, possibly at a much lower price. Thus, Cell C would hope to expand its own retail customer base and increase its profit margin on these products.”
On Tuesday, the distressed telco came out to defend its network after irked customers took to micro-blogging site Twitter to express their dissatisfaction with Cell C.
“Cell C’s network is operating at optimum levels. While there may have been isolated incidents, there have been no unusual network issues over the weekend or recently. We have also not seen any recent increase in complaints on social media.”