[By Duncan McLeod]
South Africans are a cynical lot. When it comes to telecommunications, that cynicism is often justified. Too often, SA operators are big on promises and short on delivery. But Cell C’s new strategy may indeed shake up SA broadband.
Cell C CEO Lars Reichelt is a dynamic and colourful character. His colleagues at the cellular network operator say he works harder than anyone they’ve met, often pulling stints late into the night and insisting that his team be available to work similarly long hours.
And in the past few months, the Cell C crew has never worked so hard. Not only has the company (somewhat controversially) changed its branding, it’s also building a new network at great cost as it prepares to take the fight directly to bigger rivals Vodacom and MTN.
If the launch of the company’s new wireless broadband network in Port Elizabeth is anything to go by, its rivals have plenty to worry about.
Other cities will follow soon, with Bloemfontein and Durban rumoured to be going live within the next three weeks.
Reichelt says the new network will cover a third of SA’s population by the end of the year, two-thirds by mid-2011 and 97% by the end of 2012.
Cell C had long been confined to the margins of SA’s mobile industry, forced, by virtue of its technology platform, to focus on the low-margin prepaid voice market. It lacked the network to offer broadband to high-end consumers.
Not anymore. The company will spend more than R5bn this year building an ad- vanced third-generation (3G) mobile network using a chunk of radio frequency spectrum that gives it big advantages over Vodacom and MTN.
By deploying its new network at 900MHz, instead of the 2,1GHz band used by its rivals, Cell C is able to build a broadband network at lower cost. And at 900MHz, cellular signals travel further and penetrate buildings more easily.
MTN and Vodacom can’t “refarm” their 900MHz allocation because that spectrum is already heavily utilised by their 2G voice customers, especially in the urban areas.
Cell C is also using the very latest 3G wireless technology capable of delivering speeds of up to 21 Mbit/s. I tested the network in Port Elizabeth last week and managed to achieve speeds in excess of 12 Mbit/s indoors. That’s faster than the fastest broadband speeds available on Telkom’s fixed lines.
The operator is already testing the wireless network in 10 cities, and will launch services commercially in Cape Town and Gauteng before the end of the year, Reichelt says.
But it’s in pricing that Cell C has dropped the biggest bombshell on its rivals. It has slashed broadband tariffs to as low as R33/GB, making Vodacom and MTN suddenly look very expensive indeed. Though Reichelt says the low rates are part of a launch campaign, it is likely a new base has been set and unlikely rates will rise later.
MTN and Vodacom will retaliate — they have no other option — by slashing their own data prices and investing even more aggressively in the latest wireless broadband technologies.
Already, Vodacom is building fibre to about 1 000 of its base stations so it can improve speeds to its customers; and MTN has completed substantial upgrades to its network.
Of course, there are dangers for Cell C in its new strategy. It’s not as well funded as its bigger rivals and a protracted price war could harm it more than MTN and Vodacom.
But Reichelt is doing what long needed to happen at Cell C: he’s taking a cellular minnow and giving it what it needs to be a meaningful competitor in SA telecoms.
- Duncan McLeod is editor of TechCentral
- This column, which is also published in Financial Mail, is taking a break and will return in the week of 27 September 2010
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