Cell C this week signalled it will not back down an inch as the price war between South Africa’s mobile operators intensifies.

The mobile operator, South Africa’s third largest after Vodacom and MTN, upped the stakes with its bigger rivals by cutting its prepaid rate from 99c to 66c/minute (billed per second) on a promotional basis until the end of September.

That’s when communications regulator Icasa is expected to unveil new call termination rates. If those inter-network call rates are kept at current levels, or cut further, Cell C is likely to make the 66c rate permanent by lodging it with Icasa. It also introduced new post-paid plans that have reduced contract call rates to 79c/minute.

Though Cell C has cut its headline prepaid rate by 33c, it’s not going to have a deleterious effect on its financial health. It’s a smart move by the operator to be able to claim once again that it has the lowest guaranteed call rate in South Africa, undercutting both Telkom Mobile and MTN, without incurring further financial bloodletting.

The reason for this is that the 66c rate excludes Cell C’s Supacharge rewards, which give prepaid consumers on the 99c tariff plan bonus airtime, text messages and data every time they recharge. In other words, the effective rate on the 99c plan is far lower than 99c.

Cell C chief financial officer Robert Pasley admits that the 66c plan will prove slightly more profitable for the company than the 99c one. But its new headline rate looks cheaper than MTN’s and Vodacom’s. You can bet that it will play to that in its advertising campaigns.

This latest move by Cell C comes just a month after MTN took the market by surprise, chopping its prepaid rate to 79c/minute. MTN quickly lodged the rate with Icasa, making it permanent. Vodacom has reacted, but only with a short-term and low-key promotional offer.

It’s become clear that Cell C is winning market share from rivals. The company claims that at the end of April it had 16,6m active customers, up sharply from 13,6m at the end of December. Importantly, its revenue share of the market has climbed, it says, from 10% to 12%. In March, it added a net 1m new customers (1,6m gross), a record.

Cell C’s revenues improved by 14%, though it declined to provide rand numbers for its top-line performance. It also declined to discuss its debt position or its gearing.

The numbers, at least from the second half of 2013, suggest that it’s MTN’s customers more than Vodacom’s that are churning to Cell C. If that trend has continued into the new year, it would explain why MTN got so aggressive with its 79c tariff plan.

MTN’s move has put pressure on both Vodacom and Cell C. I wrote in this column on 27 April that there are reasons to worry about Cell C’s ability to engage in a protracted price war while ensuring it meets its debt covenants. How long will controlling shareholder Oger Telecom put up with the company’s losses?

Cell C chief financial officer Robert Pasley

I now hear Cell C’s shareholders applied pressure on management to react to MTN’s lower prices with reduced tariffs of its own. That suggests they’re fully committed to this market. They’ve also signed off on R2,7bn of capital spending for 2014 (which its customers in Gauteng will admit can’t come soon enough as the network buckles under load). Last year, Cell C received R2,6bn in new equity from the shareholders, with a further R1,5bn added in 2014 so far. It raised billions more in new debt, too. That sounds like a company gearing up for a protracted fight, not one dressing itself up for a sale.

“We have to get to a sustainable level of scale, and that is what we are going to do,” says Pasley. “We are confident we can do that in a manner that will deliver profits to our shareholders, but it’s a long-term plan, three or five years.”

That Cell C’s shareholders appear to be in it for the long haul won’t be music to its bigger rivals’ ears.