Cell C is tackling the post-paid contract market by buying out new customers’ contracts with their existing telecommunications supplier.The company has spent the past two years stabilising the business and gaining critical mass in the prepaid subscriber space, and is now planning to extend the gains it has made into the contract space.
Jose Dos Santos, CEO of Cell C, comments: “It’s fair to say we own a big chunk of the prepaid market,” he says. “And we can now go forward into the post-paid market.”
Cell C currently has about 4 485 sites on air nationally and is aiming to increase this by about 1 300 this year.
With the Cell C now operating nationwide, Vodacom now carries only about 8% of Cell C’s roaming voice traffic and 4% of its roaming data traffic.
The company expects more than 50% of its revenues to be from data within the next few years.
“We have about 4 000 LTE sites planned now,” says Dos Santos. “And every site we build will be built with fibre. We have almost half of the network now linked to fibre and won’t launch LTE until we can provide a really great throughput speed.”
Cell C’s data strategy is to build strong networks in the metropolitan areas and plans blanket coverage across the major metros.
“We are now ready to tackle the post-paid market.”
The single biggest problem for users in moving to a new network is the porting cost, and the company has solved this problem.
The other big obstacle is the contract, where telcos insist on cancellation notice and charges.
“We have launched a range of new products called Contract Buyout,” Dos Santos says. “We will give every user up to R10 000 to buy themselves out of their contract.”
Importantly, on the new Cell C contract, the company will guarantee not to increase prices within the terms of the contract.
Cell C’s prepaid saw 17% revenue growth in the first quarter of 2015, driving the company’s growth over the last year.
Contract spend, which accounts to about 35% of the company’s revenue, was flat year-on-year, says Robert Pasley, chief financial officer of Cell C.
While the contract market has not been a focus over the past year, Pasley says it will come under the spotlight in 2015.
Revenue from other services, generally low-margin services, declined 44% although Pasley points out this doesn’t have a big effect on the bottom line.
Incoming revenue has declined 18% since last year, largely as a result of the reduced mobile termination rates (MTR).
Data traffic has seen a big growth since the first water of last year, at 44%, while the data revenue increased 59% over the period. The data revenue now represents more than 30% of total service revenue, Pasley says.
Cell C focused last year on putting the company back on an even footing, and the company reduced its direct expenditure by 17% year-on-year. This was largely driven by the lower MTR as well as less national roaming as more traffic is carried on Cell C’s own network.
A 4% reduction in operating expenditure has resulted from increased efficiencies in the operations, while network costs have been increased only marginally in relation to network improvements and a 6% increase in sites.
Subscribers grew substantially in the quarter, and Cell C now has 17,7-million prepaid and 2,2-million contract customers with 500 000 other subscribers.