The latest annual financial results from Blue Label Telecoms show that Cell C is gaining ground on its rivals and is specifically stealing market share from rival MTN.
In a presentation accompanying publication of its results for the financial year ended 31 May 2013, the company, which is by far the country’s largest distributor of prepaid airtime in South Africa, shows that Cell C’s share of prepaid airtime revenue has grown by two percentage points in the past year, from 10% to 12%, while MTN’s has fallen from 38% to 36%.
Blue Label co-CEO Brett Levy describes the shift as “massive” and expects it to “snowball”. The company’s data on prepaid airtime revenue is for the period to end-July 2013.
“The trend is definitely on the up,” Levy says. “For the first time, consumers can see value in a 99c package.”
He says he agrees with MTN’s assessment that the operator was too slow in reacting to Cell C’s tariff cuts, which were introduced in May 2012. “What Vodacom did cleverly is they didn’t sit back, he says. “MTN sat back for too long and you saw it in their results where they went net negative by 400 000 customers.”
MTN admitted that it was “slow to respond to aggressive price competition” in both voice and data and that this was partially responsible for the company’s underperformance.
At the end of June, MTN’s South African unit had 25m subscribers, 400 000 fewer than at the end of December last year.
“MTN South Africa felt the effects of weaker consumer demand and was slow to respond to aggressive price competition in both voice and data offerings,” the MTN group said in notes accompanying its interim financial results, published on 14 August. The company chopped its call tariffs earlier this year.
“After a difficult start to 2013, which saw decreased subscriber net connections, the prepaid segment managed to regain some market share in the second quarter due to improved dormancy management and as customers responded positively to lower tariffs and increased promotional activity,” MTN said.
But Levy says he expects the shift in market share to accelerate. “This thing is not stopping. This snowball is about to get really big. South African consumers generally are quite lethargic and don’t jump to lower prices. We generally sit back and watch. It takes a long time for consumers to adapt and change, but when they do, it happens rapidly.”
Blue Label co-CEO Mark Levy says South Africa’s mobile market has become “truly competitive” in the past year. “People relish the opportunity to hunt for prices. [South Africa] is aligning itself with global trends from a competitive point of view.”
He says that two years ago, the average customer who loaded R65 in prepaid airtime could make only 15 one-minute phone calls a month. “Today,” he says, “the same customer can load R65 and can make 65 phone calls a month.”
This, Levy says, means consumers are getting 400% more value than they were two years ago. — (c) 2013 NewsCentral Media
