Why Cell C is fighting for unregulated over-the-top services

Before last week’s parliamentary portfolio committee meetings on over-the-top (OTT) services regulation, Cell C released a statement by its CEO Jose dos Santos that said that “Vodacom and MTN have declared war on consumer interests” in a bid to maintain “their stranglehold on a vital artery feeding [South Africa]’s economic and social future”. But why is Cell C alone among the major networks on the side of unregulated OTTs? STUART LEWIS tries to figure it out.

Founded in 2001, seven years after its two biggest competitors, Cell C is still largely a new kid on the block. However, in its stand against the regulation of OTT services like Whatsapp, it has drawn a line in the sand, with Vodacom and MTN on one side and itself, OTTs and the South African consumer on the other. To understand why it makes perfect sense for Cell C to do this, you have to understand the industry that it is operating in.

The South African mobile market is divided into two kinds of operators: those that own infrastructure, and those that piggyback off of infrastructure built and owned by other companies. The four largest players in the country are, in order, Vodacom, MTN, Cell C and Telkom – all of whom built and maintain their own real world network of cellphone towers and other connections.

The rest of the market is divided up between Neotel (those guys who are constantly digging cable trenches across busy roads) and mobile virtual network operators (MVNOs) like FNB Mobile and Virgin Mobile. MVNOs sell phones and contracts but use infrastructure built by other networks. For the most part, they are hosted on Cell C’s network.

As of April last year, the South African mobile network was estimated  to consist of around 80 million connections, though this has undoubtedly grown significantly since then. Vodacom still controls the largest market share, though their subscriber base has largely stagnated and is starting to decline.

MTN is rapidly closing in on Vodacom, however, and has grown steadily over the last four years. Cell C is growing at a significantly faster rate and is starting to capture much more of the market but still lags behind its much older competitors.

Cell C is dwarfed by these two companies who are either the biggest African mobile operator, like MTN, or owned by the world’s second largest telecommunications company, like Vodacom. It also only entered the South African market long after MTN and Vodacom were already household names so it is constantly playing a game of catch-up.

In order to make up the deficit in infrastructure and customer base, Cell C has to be innovative and follow the demand in the industry rather than protect its profits.

“Cell C is the challenger network,” said Cell C’s chief legal officer, Graham Mackinnon, in a recent radio interview.

“We’ve had to come up with products that are very customer-friendly in order to attract customers to ourselves… We have worked out a model that says it would be best to embrace change, to embrace the OTTs and try and find ways to satisfy our customers.”

All their rhetoric around the OTT hearings has focused on the “anti-consumer” practices of MTN and Vodacom and how embracing rather than regulating OTTs will benefit consumers, thereby positioning themselves as the network on the consumer’s “side”.

Putting the rhetoric aside, Cell C has recognised where the future of mobile usage is going and has realised that by pre-empting that growth they can steal a march on their competitors and maybe even grow past them. To this end, they offered zero-rated Whatsapp leading up to the OTT meeting in parliament to “show their support” and now offer a R5/ 30 days Whatsapp bundle.

Since Whatsapp is the most used social platform in South Africa with upwards of 16 million users, this is an incredibly smart move. It also supports the next two most popular platforms – Facebook and Facebook Messenger – with its free Facebook offer. Cell C is openly and unapologetically targeting these platforms.

We should not even begin to think that Cell C’s positioning of itself as a crusader for our right to access these kinds of services means that it is in this battle for anything more than an increased market share and customer base. But for now, its interests align with the greatest benefit to the South African consumer.

Featured image via Wikimedia Commons. 

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1 Comment

  1. Hamish says

    This article is off from reality. Cell C is standing in opposition because that differentiates them from the aggressors Vodacom and MTN. They have been trying disrupt the business because although the old customer acquisition business is great it is getting existing customers to spend more money. Increasing the average revenue per user is where most networks are at because South Africa is oversubscribed. The novelty of owning a cellphone has worn off. Cell C is championing OTTs because there are no more customers, Cell C has to poach existing customers from other networks. Their prepaid game has resulted in massive acquisition and massive churn. If Vodacom and MTN supported OTTs Cell C would find another way of disrupting things.

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