Lack of differentiation among SA telcos hurts Cell C

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South Africa’s third biggest mobile operator, Cell C, is the biggest casualty as local cellular networks have increasingly become undifferentiated when it comes to customer satisfaction.

This is according to the South African Customer Satisfaction Index for Mobile Telecommunications Services, conducted by Consulta.

The 2019 index surveyed over 2 500 customers across prepaid, top-up and postpaid (contract) customers who make use of the collective product offering of voice and data solutions. The survey was conducted during the second half of 2019.

Consulta found the South African cellular network industry has improved in the customer satisfaction stakes.

It notes SA’s three largest cellular networks – Vodacom, MTN and Cell C – have all recorded improvements in satisfaction since the 2018 index; however, long-term trends indicate a degree of inconsistency when it comes to keeping their customers happy.

According to the study, one pertinent finding is that customer expectations have consistently declined over a four-year period.

Consulta says this is cause for concern as declines in customer expectations have been proven to foreshadow inevitable drops in perceived quality, value and ultimately overall satisfaction.

“Results indicate the networks included in the measure are struggling to differentiate themselves on unique, customer-centric needs and offerings, instead preferring to compete directly with each other by seemingly targeting identical markets and segments,” says Ineke Prinsloo, head of customer insights at Consulta.

No escape

Prinsloo notes this battle is especially damaging to Cell C, which continues to trail behind Vodacom and MTN on customer satisfaction.

“It is difficult to see how Cell C will escape its current troubles without clearly understanding and appealing to a more niche portion of the market.”

The report comes as Cell C is facing difficulties on a number of fronts.

Besides failing to give Vodacom and MTN a run for their money, SA’s third biggest operator is saddled with a huge debt of about R9 billion.

Vodacom and MTN both enjoy superior network infrastructure and deeper pockets for sizeable capex investments in comparison with Cell C.

Although the embattled Cell C lost 2.9 million subscribers for the year ended December, it says the margin of its existing customers is better as a result of acquiring profitable customers.

Lack of capital is also another issue Cell C is facing, with CEO Douglas Craigie Stevenson recently saying “…a successful recapitalisation will secure the long-term sustainability of Cell C”.

Last week, Cell C announced it will split off some of its assets as part of an attempt to restructure its debt. This after the Competition Commission recommended conditional approval of the proposed acquisition of certain Cell C assets by special purpose vehicle Gatsby.

It also emerged this month that some senior managers and executives at Cell C may lose their jobs, as the company has initiated a consultation process with the possibility of redundancy of certain positions and retrenchments.

Regarding lack of differentiation, Consulta says Cell C can take a leaf from the book of the financial services sector, which provides “an excellent case study in how successful a narrow, focused approach can be if one looks at how successful brands such as Capitec (in banking) and Virseker (in insurance) have been,” says Prinsloo.

Data debate

Consulta notes mobile data continues to remain a contentious issue, with customers frequently complaining about their respective network’s data network quality and giving particularly low perceived value ratings (less than 70 for each network).

It believes that this, coupled with a lack of differentiation, gives new players an opportunity to make inroads and attract customers who are looking for a more customer-centric offering that is better suited to their unique needs.

While Vodacom and MTN remain at the forefront in the premium segment for now, the latest index shows increasing erosion of this position as customers become less concerned with the quality of voice networks, placing more emphasis on mobile data offerings and services.

“The index surveyed both prepaid and contract (postpaid) customers, and it is concerning to note that across the board, contract customers are the most dissatisfied and have the most complaints,” Prinsloo says.

“This suggests these customers are given the least attention in terms of value, quality of products and relationship with their provider. This should be a red flag given that contract clients are what we view as ‘bankable’ business for network operators. Once tied into a contract, it seems there is a distinct level of neglect that creeps into the customer experience and service for these customers.

“It is a dangerous position to be in as these customers feel like hostages as they are unable to move their business, or get their complaints resolved, so they will be the first to move their business when they can, and in their wake will do immeasurable damage to the brand reputation in terms of negative word of mouth,” explains Prinsloo.

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