Mobile operator Cell C has held discussions with Telkom about opportunities to consolidate South Africa’s mobile phone industry, CEO Alan Knott-Craig revealed in a radio interview on Thursday (full audio transcript below).
In response to a question from Talk Radio 702 host Stephen Grootes about whether Knott-Craig had held talks with Telkom about consolidating the mobile market, the Cell C CEO replied: “I have addressed it with them, yes.”
He did not reveal in the interview what specifically was discussed.
Knott-Craig said “it does make sense” for Cell C and Telkom to talk about consolidating the market. “Whether it will happen or not, I don’t know. In my personal capacity, I think consolidation is one way to solve a lot of the problems.”
Earlier in the interview, which was prompted by comments made by Knott-Craig on Wednesday and published on TechCentral that the South African mobile market was too small to support four mobile operators, he again defended his call for “aggressive asymmetry” to support Cell C and Telkom Mobile.
Knott-Craig wants the Independent Communications Authority of South Africa (Icasa) to create regulations under which wholesale inter-network call fees — known as mobile termination rates (MTRs) — are skewed heavily against Vodacom and MTN.
“South Africa is a saturated market,” he said. “There is 120% saturation, so the only way smaller players get new customers is they steal them from the larger networks and the only way they do that is by bringing prices down, which is what they’re supposed to do.”
But, he said, this is very difficult to do in a saturated market.
“Cell C started building its network some 10 years after MTN and Vodacom built theirs, so catching up 10 years is not possible. Until [operators]achieve scale, which is around 25% market share, they cannot be sustainable…
“Until they arrive at scale, they burn cash. They can’t burn cash forever because the investors will eventually stop investing. When you look at a market, you have to consider to what extent investors are prepared to keep funding operators until they become sustainable and that’s why you have regulators. What regulators do right around the world is they do things like giving aggressive asymmetry to smaller players until they’re not small.”
Listen to the interview (republished with permission):[audio: http://techcentral.co.za/wp-content/audio/AKC702.mp3]
He said smaller operators in South Africa are effectively subsidising Vodacom and MTN. “Cell C and I presume Telkom Mobile are net payers to Vodacom and MTN on interconnect. That is not what was conceived by the regulator when they reduced MTRs,” he said.
“When they reduced MTRs, what they should have done at the same time was use more asymmetry. They did introduce asymmetry, but not nearly at the level [required]. MTN and Vodacom have enjoyed asymmetry [with Telkom]of 400% for 15 years, so why anyone would find this unusual for Cell C and Telkom Mobile to enjoy any asymmetry I would find unusual.” — (c) 2013 NewsCentral Media