Stop aggressive price cuts, Cell C

An analyst has cautioned Cell C to rein in on its price cutting initiatives, at least until it is able to sustain its network quality.

Since the appointment of Alan Knott-Craig as Cell C CEO in January 2012, the group has shaken up the market with aggressive pricing models, a strategy which has paid off in terms of upping its subscriber base.

The mobile operator noted earlier this month (October) that it had signed up one million gross customers in September, having achieved that milestone for the first time in July.

The company told BusinessTech that it fell marginally short of reaching a target of one million subscribers in August, meaning that its gross sign-ups was close to three million over the past three months.

“We have grown our base by 33% to 12.3 million customers in just 18 months,” Knott-Craig told delegates at the MyBroadband 2013 conference in Midrand.

In July 2013, Cell C revealed that it had 11.7 million subscribers on its network – a steady climb from 8.2 million users in 2011 and 9.4 million in 2012 – boosting its relative market share to over 17%.

Knott-Craig has said that the company is targeting 25% market share in order to be profitable.

However, Cell C’s network has suffered in the process, something that Knott-Craig has vowed to fix.

Nick Crail, Portfolio Manager at RMB Private Bank said that, with three million net customer gains over the last 18 months, “Cell C needs its infrastructure to be able to sustain network quality.”

“Personally, my hope is that over the next year we won’t see aggressive price cuts but rather Cell C making more money and investing heavily on infrastructure and then perhaps start trying to aggressively attract new clients,” he said.

Vodacom and MTN

Crail noted the impact of Icasa‘s proposed MTR glide path on Vodacom and MTN, and particularly the former because of its reliance on the local market.

However, on the extent of the impact, he said: “It is tough to tell as it will depend on what the competition (Cell C and Telkom Mobile) does with pricing and strategy of gaining market share.”

“All else being equal, Vodacom will lose 2-3% ebitda (earnings before interest, taxes, depreciation, and amortization) with MTN a lot less. The main question is what effect these proposed MTR cuts will have on pricing. This depends on Cell C’s strategy,” Crail said.

“It is imperative for new spectrum to be awarded to all players in the short to medium term,” he said of the industry as a whole.

More on Cell C

Cell C subscriber growth soars

Cell C admits network “taking strain”

Cell C network “perfect” by November: CEO

Cell C dead by 2014: analyst

Cell C sign-ups boom 

Cell C seeks profitability within 3 years

Cell C network quality complaints

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Stop aggressive price cuts, Cell C