Cell C expands 21Mbps HSPA+ coverage to George

[gboy]

no man 74

74 + 500 cows,

[Johand]

Selling data at below cost is not a sustainable business model. The very dangerous thing Cell-C did here (for themselves), is to go into the market at such low prices. While it will buy them market share, how do they turn this setup into profitability?

At the end of the day they will have to start making money somewhere. Where will that be? Not from data, especially if you have a brand new multi-billion rand network to pay off.

Cell-C is making the very same mistake Neotel did. Come into the market with below-cost pricing and then hoping for a miracle to turn you profitable.

Reality is that if you sell below cost, you dig yourself deeper into the hole with every subscriber you sign up.

Do not underestimate the effect of cash-flow on a business. Cell C is getting cash upfront, instead of getting an annuity stream - this can work wonders, especially if you are financing capital expenditure. Plus, even though it seems like it, these towers are not only for data. Their voice business will make use of the same towers, and they already had to have both the physical towers in place, as well as the back-haul links. And the nice thing about the back-haul links is that the price is and is going to nosedive so they will be able to secure pretty good R/Mbps deals on those - they will probably be forced to upgrade the back-haul links anyway so that suppliers can maintain their revenue streams even as the R/Mbps is falling.

And unlike Neotel, they already have a consumer distribution network, and they already have a subscriber base.

[ToAsTeD]

Excellent news. Wonder when they'll offer coverage in plett

[3G-Spot]

Not to be negative, but I just suspect that the Gauteng 'switch on' will give Cell-C some problems, I don't have full confidence in Cell-C yet. I wonder if they've covered all bases. I hope all goes well though.

[Viper25]

Patiently waiting for the jhb launch..

[TwoCents1000]

Correct - but how do you know they are selling below cost (known as dumping)?

Also, there is another well tried & tested marketing strategy known as a 'loss leader' to enter a market. I see nothing wrong with such an approach, nor do I find it flawed.

Cell C has the potential to remove a lot of Vodacom & MTN's business for 12 months. Sometime during that period, perhaps it will be Vodacom & MTN who will be selling below cost as their subscriber base diminishes and their revenue is squeezed.

If it is a 'loss-leader' what is it 'leading'? That is exactly the question I posed.

You can lead with a loss-leading product but it then follows that you must be able to sell something extra because of this and this something extra is where you then make your money.

But this is precily what I'm asking. What is this 'thing' Cell-C is going to sell to make them money?

Vodacom and MTN can sell data a no or even negative margins as they have this massive cash-cow called 'voice'. Cell-C don't have such a cash-cow, have massive debt to repay and then they come in with these below-cost pricing.

It's ballsy, but will it work? I fail to see the strategy here.

[TwoCents1000]

Do not underestimate the effect of cash-flow on a business. Cell C is getting cash upfront, instead of getting an annuity stream - this can work wonders, especially if you are financing capital expenditure. Plus, even though it seems like it, these towers are not only for data. Their voice business will make use of the same towers, and they already had to have both the physical towers in place, as well as the back-haul links. And the nice thing about the back-haul links is that the price is and is going to nosedive so they will be able to secure pretty good R/Mbps deals on those - they will probably be forced to upgrade the back-haul links anyway so that suppliers can maintain their revenue streams even as the R/Mbps is falling.

And unlike Neotel, they already have a consumer distribution network, and they already have a subscriber base.

They do have a channel and a base. And it's much better than Neotel, I'll concede.

But their cash-upfront pricing model is counter-intuitive to servicing this base. In other words, the traditional Cell-C consumer is not the guy that will slap R3000 cash down. As a matter of fact, very few people would.

So while getting your cash up front is very clever of Cell-C, I wonder how many people have actually parted with so much money. I suspect, very few.

We should ask the mods to run a poll.

[Icarium]

Why are you so sure that this is a loss leader? At R50 a gig this is still well above what you would pay for bandwidth from a traditional ISP, while thier actual backhaul costs are probably not that much higher than traditional fixed line ADSL. It is the R2000 a gig out of bundle pricing in this country that is mental, not Cell C.

[mazelove]

Dont be silly the garden route is one of the biggest tourist destinations in SA. George has the second largest population in the Western Cape, the largest being Cape town of cause. Its also the commercial hub of the Garden Route.

Good strategy imho, they're getting their ducks in a row.

lol i don't think there will be more than 0 tourist will be intreasted in purchasing these 12 months prepared data bundles

[Jola]

We should ask the mods to run a poll.

Would be interesting.

I bought 2 * 24GB and 1 * 60GB, two of those with modems - I'm canning my 4mbps ADSL, this is way cheaper.

[Weasley]

If it is a 'loss-leader' what is it 'leading'? That is exactly the question I posed.

You can lead with a loss-leading product but it then follows that you must be able to sell something extra because of this and this something extra is where you then make your money.

But this is precily what I'm asking. What is this 'thing' Cell-C is going to sell to make them money?

Vodacom and MTN can sell data a no or even negative margins as they have this massive cash-cow called 'voice'. Cell-C don't have such a cash-cow, have massive debt to repay and then they come in with these below-cost pricing.

It's ballsy, but will it work? I fail to see the strategy here.

i would think cellc is going after the market that understand and use the internet. They then to be bit bigger spenders than there current market share this they will bring in more voice for cellc and less for the other 2

[jimmycool]

Um, what about top-ups? once users get hooked on 21mbps and their bandwidth run out they will be queueing up to by top ups at +/- R50 a gig. that way Cell C makes approx. R40 on each top up. If they didnt offer fast enough speeds to begin with then not that many people would burn through their data before the end of each month.

[Moshidi]

i agree. im gonna use a cellc sim in mobile as well. Thats business they wouldn't have had otherwise.

[jimmycool]

You see - if you are locked in for 12 months to Cell C then you have no choice but to buy top-ups when you run out. I think its down right diabolically clever. Build a fast network - lock people in for 12 months - give them enough gigs to seem reasonable- wait for the gigs to get burned up- ching, ching, ching ching as we all start buying "cheap" gig top-ups. (at least a lot cheaper than the other networks)

[vzta22]

For those who think Cell C selling their broadband service at cost, I totally disagree! They have done their stats and know what they are doing. Among the 3 operators, it would be more suicidal for them as their financial position is not very stable.

My view for leaving Gauteng to last is a strategic move by Cell C. They have to test the waters in areas that have less demand so that they don't over stretch the network and result in unsatisfied customers. If they started with Gauteng and for some reason the network collapsed, the forum would be posting negative sentiments about Cell C which could make it diffucult for them to gain market share.

It also makes business sense for Cell C to provide broadband services to fishermen when they are at sea...lol!