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Cell C set to inject R2.3bn into network

23rd May 2014

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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South Africa’s third-largest mobile operator has taken the industrywide price war “to the next level” as it unveils a new 66c-a-minute offering, along with three new postpaid 79c-a-minute on per second billing products.

This comes as Cell C disputed reports of a flailing company attempting to unseat South Africa’s two largest mobile operators’ position as a duopoly.

Newly appointed Cell C CEO Jose Dos Santos last week averred that the company was in a stronger position, backed by supportive shareholders, after its 2012/13 turnaround, and was able to deliver on reduced prepaid and postpaid call rates.

While Dos Santos, who replaced Alan Knott-Craig at the helm this month, and CFO Robert Pasley could not be drawn to reveal the profit- ability levels of Cell C, they noted that its earnings before interest, tax, depreciation and amortisation were positive and the company was well-funded, receiving an injection of R2.6-billion in 2013 and R1.5-billion during the first four months of 2014.

The group had R1.8-billion local debt and $120-million foreign debt and talks were cur- rently under way for a $125-million to $200- million foreign currency deal that would be completed by year-end.

Dos Santos told media at Cell C’s new offices, in Woodmead, that its subscriber base had jumped 35% year-on-year by the end of 2013, which translated into a total revenue increase of 14% year-on-year.

By April this year, the group was adding one-million customers a month to its network, with March boasting an “impressive” 1.6-million gross connections, with one-million of those being net connections.

Cell C’s customer base had grown from 13.6-million in December 2013 – after reporting net growth of 3.5-million for 2013 – to 16.6-million in the first four months of 2014.

“We have survived,” Dos Santos said, noting that its market share by revenue had now reached nearly 12%.

The growth was attributed in part to a price war with Vodacom and MTN led by former Vodacom boss Knott-Craig, who had vowed to capture 25% of market share by revenue over five years.

Knott-Craig, who stepped down as Vodacom CEO in 2008, after cofounding the group almost 20 years ago and guiding it to become the country’s leading telecommunications company, drastically cut local and international voice call rates and implemented simple and transparent tariffs in a country that held the seventy-third most expensive pricing structure globally.

Dos Santos said to support Cell C’s accelerating growth, R2.3-billion capital expenditure had been budgeted for 2014.

The company, which built 439 sites in 2013, continued its intensive investment in its network with an additional 318 sites – 83 of which were already live – planned for 2014.

By September, Cell C, which carried 92% of its traffic on its own network, would boast 4 500 network sites.

Further, to bring more stability into the network and boost coverage and quality, Cell C was in the process of swapping the radio-access network equipment of more than 1 000 sites to Huawei technology in a three-phase process, with the transfer of the first 392 sites during Phase 1 concluded by April.

Phase 2 would see an additional 456 site swaps by the end of September, with the final 382 sites completed by the end of November.

Cell C had also upgraded and renewed its transmission network over the last eight months, deploying additional fibre routes and completing the fibre rings in metropolitan areas.

“This was done with the aim of improving quality and introducing a higher level of redundancy in the network,” Dos Santos explained.

This, as well as the upgrade of other old and inefficient optical transmission equipment, formed part of Cell C’s four-year mobile backhaul transport upgrade project, in partnership with Huawei.


After the temporary implementation of the Independent Communications Authority of South Africa’s (Icasa’s) mobile termination rate (MTR) cuts on April 1, rivals Vodacom and MTN had tabled new 79c-a-minute deals to gain back customers lost to Cell C’s 99c-a-minute offerings.

“For two years, Cell C has had the lowest guaranteed flat rate in the market. While it has taken some time for our competitors to respond, we are still pleased to see competition hotting up at last, which is always good news for consumers,” Dos Santos commented.

This had followed the South Gauteng High Court’s decision to allow the termination rate of 20c and the asymmetric rate of 44c to be implemented for a six-month period, while Icasa completed a costing exercise and followed “due process” – in effect, to “correct” the “irrational and arbitrary” determination of the regulations fairly.

Dos Santos said Cell C’s rivals’ reaction after the cuts showed that lower termination rates held the power to bring down the cost to communicate for the consumer and supported his confidence that Icasa would maintain its glide path following the MTR review, the outcome of which was due in September.

In the interim, with the lower MTRs, Cell C was also in a position to turn its own rates “upside down” – at least until September.

The company maintained its 99c packages for customers to continue to recharge and receive ‘Supacharge’ product benefits.

However, for those wanting more talk-time and “no other frills”, they could migrate to the new 66c rate.

The three new postpaid contract products, ChatMore Standard, ChatMore 200 and ChatMore 400, were all offered at a 79c flat rate to any network, at anytime, on per second billing.

Both contract and prepaid offers would kick off on June 1.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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