The sheer human effort, and money, that has in recent years gone into saving South Africa’s fourth-largest mobile operator has been extraordinary.
Most people would have given up long ago, leaving Cell C to go to the wall. It had been racking up debts at an alarming rate as it tried to compete, in vain, against its larger competitors in network infrastructure.
But the Levy brothers of Blue Label Telecoms, who put their fortunes and reputations on the line by investing in the troubled operator, are not most people.
And there are signs that this hard graft — by Cell C’s new management team, and by Brett and Mark Levy — has not only stopped the bleeding but created a platform from which the business can start to rebuild.
At a big brand refresh event in Joburg last Thursday, Cell C’s management team, led by former Vodacom executive Jorge Mendes, sought to project an image of a company that’s ready for a fight, one that can reclaim the market share lost during years of navel gazing.
After the recent recapitalisation led by Blue Label (the second on the JSE-listed firm’s watch), a strategic shift in its approach to network investment and a painful job-shedding exercise, Cell C is on a stronger footing financially than it has been in years. Now it needs to prove to consumers not only that they should put an orange Cell C SIM card in their phones but that orange — and not yellow, red or blue — should also be the colour of their primary or only SIM.
Since its founding in 2001, Cell C has struggled against deep-pocketed rivals Vodacom and MTN, but also late mobile market entrant Telkom, which relegated the company from third to fourth market player by customers.
It simply couldn’t keep pace in providing nationwide coverage and was always late in bringing the latest cellular technologies to market.
Something had to change. Cell C simply did not have the balance sheet that would allow it to compete with the combined R20bn in capital expenditure that Vodacom and MTN injected annually into their networks.
Cell C can now redirect capital into areas that will allow it to compete more effectively, including improved customer service and better marketing
So, it pivoted decisively: it stopped chasing its rivals in network investment, outsourcing its radio access network (the network of base stations that connects consumers to the core network) to MTN and Vodacom.
As a result, Cell C can now redirect capital into areas that will allow it to compete more effectively, including improved customer service and better marketing. Even though it still owns its own spectrum assets, Cell C has become more of a cellular service provider than a full-fledged telecommunications operator — and that’s not a bad thing.
It gives Cell C access to better infrastructure than it could build, while freeing it to focus on consumer services. MTN and Vodacom also benefit: they earn revenue from Cell C, and the deals have helped prevent their smaller rival from going under. If Cell C hadn’t been saved, this would have invited further regulatory scrutiny of the market’s two leading players.
For Cell C, the shift in strategy, coupled with its recent recapitalisation, gives the company another — perhaps final — shot at redemption. It must keep its costs tightly contained while it tries to convince consumers that it is indeed now a leader in network quality, coverage and customer service (an area where Vodacom and MTN have struggled).
The company arguably has the strongest C-suite (ha ha) in its history, with many experienced former Vodacom executives now among its leadership team. Its chief marketing officer, Melanie Forbes, also an ex-Vodacommer, has done a great job with the brand relaunch — an auspicious start for the company’s next chapter.
Cell C was once seen as a consumer champion. It lost its way as the debt noose tightened, affecting its ability to innovate and compete effectively. It also tried — and failed, at great cost — to launch a media company to compete with the likes of MultiChoice. It was a fool’s errand.
It’s early days still, but if Mendes and his new management can execute the new strategy effectively and convince consumers to “switch to see” (its clever new marketing payoff line), it could still, in time, carve out a profitable niche in South Africa’s competitive telecoms industry. That said, much will depend on its ability to keep the momentum building after the big brand relaunch.
* McLeod is editor of TechCentral
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