Blue Label Telecoms has for the first time revealed some of the details of Project Boston, a deal that has seen Cell C’s whole postpaid subscriber base migrated onto the Vodacom network.
There was widespread speculation that Cell C sold its contract and broadband subscriber base to Vodacom in a secret deal that involved Comm Equipment Company (CEC), a subsidiary of Blue Label.
Cell C, Blue Label Telecom, and Vodacom vehemently denied that the contract base has been sold.
When quizzed about the agreement, however, these parties would not provide further details.
“These commercial agreements, their existence and their terms are confidential between Cell C and the counterparties to the contract,” Cell C previously told MyBroadband.
Vodacom would also not answer any questions regarding the relationship, saying it is “contractually precluded” from commenting on the matter.
However, following the deal’s conclusion, Cell C contract subscribers no longer saw “Cell C” as the network their phones connected to. They saw Vodacom as their network provider.
When MyBroadband asked Cell C if its contract customers also run through the Vodacom core network, Cell C CEO Craigie Stevenson said: “No, they run through our core.”
Blue Label Telecoms has now disclosed the existence of “Project Boston” in its results announcement for the financial year ended on 31 May 2021.
According to Blue Label, Cell C was faced with the decision to either wind down or restructure its postpaid service offering.
“During the 2021 financial year, the Group, through its subsidiary Comm Equipment Company (CEC), entered into an arrangement with Cell C to facilitate Cell C’s operation of the base,” Blue Label stated.
The agreement is with effect from 1 November 2020 for an initial period of five years. CEC has the right to renew for a further four years.
CEC is entitled to receive a share of the subscription income generated by Cell C from a subset of new and upgrading postpaid subscribers that sign up, extend, or upgrade their contracts after 1 November 2020.
Cell C will also pay CEC certain fixed and variable payments.
“Cell C will remain entitled to the subscription income of existing subscribers at 31 October 2020 for the remainder of the subscribers’ contract and a share of the ongoing revenue of New and Upgrade subscribers,” Blue Label said.
“The aim of the reorganisation would be for the base to remain intact and grow in the future, and for Cell C to have limited downside risk on the base.”
In its results presentation, Blue Label revealed that Cell C is using managed services support for a range of back-office functions related to servicing its postpaid base.
CEC performs certain services itself and has subcontracted the balance to a subsidiary of Vodacom.
“The rationale is to reduce Cell C overheads by leveraging Vodacom scale and expertise,” Blue Label said.
So far, the relationship between CEC and Cell C is mutually beneficial, it said.
Project Boston has also rewritten the way CEC funds handsets to Cell C subscribers, Blue Label stated.
“Bad debt risk now sits with CEC,” said Blue Label.
“With the guidance of the credit specialist from BluNova, the insights and experience of the Vodacom collections team, and overall data-driven approach to the Postpaid business, CEC intends to reduce bad debt risk and realise the benefits.”
In its annual financial statements, Blue Label reported that Cell C had a 4.4% decline in revenue from R14.59 billion to R13.95 billion between 2020 and 2021.
Despite the revenue decline, it reported a R2.36 billion net profit after taxation, a substantial increase from the R10.69 billion loss Cell C reported last year.