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Cell C rejects morphing into MVNO, forges ahead with new strategy

Read time 4min 10sec

Cell C has rebuffed suggestions it is morphing into a virtual network operator, following the telco’s recent decision to migrate postpaid, prepaid and broadband customers to Vodacom and MTN.

The announcement last month that Cell C is migrating its most lucrative customers to Vodacom, coupled with an already existing deal with MTN for its prepaid customers, triggered suggestions that the telco may be transitioning into a “super” mobile virtual network operator (MVNO).

Cell C, which is implementing a turnaround strategy, has rejected this proposition, saying it is simply implementing a more efficient business model, and the network transition is one of the pillars of its new strategy.

The mobile operator has consistently been under-performing for some time − generating significant losses of R33 billion over the years − but CFO Zafar Mahomed told ITWeb that Cell C is on the mend to become a profitable business.

Master plan

Mohamed says buying more capacity from both Vodacom and MTN is in line with Cell C’s strategy of becoming an efficient mobile network operator.

“We are not turning into an MVNO. What we have done is take a portion of the entire value chain and effectively outsource it.

“For us, it’s [more] about the customer than it is about networks and towers. This is something emerging across the world. Companies are splitting between towers and radio access on one hand and are involved in provisioning of services on the other.

“That’s why getting access to spectrum is so important because that gives us the ability to be more efficient and monetise the capacity that we have through spectrum. So we are saying we rather do that than worry about maintaining 6 000 towers, load-shedding, generators and the diesel.”

In an interview with ITWeb, Mahomed said Cell C is transitioning into a much more valuable entity.

“What we are saying is that from a customer perspective, we want to offer them the best quality network. What you see at the backend, it isn’t a customer issue because the customer attraction is with us. So how we provision the network is not for the customer to worry about.”

Mahomed said Cell C wants to provide the best network experience, so it has migrated postpaid customers to roam on Vodacom and prepaid on MTN.

“This is what government and ICASA are looking at – how do we reduce the duplication of infrastructure across the country? This is what we are finding across the world. So for us, it is focusing on being customer-centric, as opposed to being network-centric,” he noted.

“It doesn’t make sense to us to continue spending billions on infrastructure; we would rather take a slice of that and pay Vodacom and MTN and get a ready-made quality network for our customers.”

Cell C CFO Zafar Mahomed.
Cell C CFO Zafar Mahomed.

Quality negates network identity

With the roaming agreements, Mahomed said the network becomes invisible to the customer as they are only interested in the quality of service they receive.

This, he said, is the maturity of the industry, “being less focused on which network you are using, provided the networks are of equal quality”.

Furthermore, Mahomed noted the infrastructure sharing model is interesting to Cell C, as it frees up substantial capex, helping the company save significantly while enjoying the benefits of high-quality networks.

He said it didn’t make business sense that Cell C was spending only a third of what Vodacom and MTN were investing annually while trying to build a network of high quality.

“Typically, Vodacom and MTN are spending R8 billion to R10 billion a year each, whereas we were spending R2 billion to R3 billion, Telkom R5 billion to R6 billion. So you can understand the massive investment in infrastructure in the country.”

In the interview, Mahomed gave a glimpse of how the roaming deals are structured.

“With MTN, we had a deal in terms of rural network because Cell C has always been an urban network and it was good for us to do a deal with MTN in terms of roaming in rural areas.

“With Vodacom, we had a 2G roaming deal with them because it’s very expensive to be able to cover 2G, 3G and 4G roaming. For a single operator like ourselves to have 2G, 3G and 4G, it is expensive. So we already had these agreements in place, so one of the strategies we formulated in the new business model meant we will exit our radio network access network.”

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