Finally, there’s competition when it comes to mobile broadband. Albeit only in Port Elizabeth.
Port Elizabeth residents now have the best mobile broadband networks in the country. Cell C’s 4Gs service (3.75G or HSPA+), capable of speeds of up to 21Mbps, has just gone live. You can be sure that rivals Vodacom and MTN have “tweaked” their networks in the coastal city too, to improve their consumers’ experience. It’s astonishing what the mobile operators know about each other’s plans.
Cell C has some ambitious targets and already we know that they’re looking to launch the new high-speed network in Bloemfontein and Durban shortly. It seems like bigger cities like Johannesburg, Pretoria and Cape Town will have to wait while Cell C gets the new data network working “properly”.
Industry insiders point to challenges with very dense areas like the Sandton CBD which the operator needs to iron out. Also, quite obviously, it’s easier to get a high-speed mobile data network working effectively in a city the size of PE. Try that in sprawling (never-ending) Joburg or near “the Mountain” and you’ll encounter some serious problems.
Cell C CEO Lars Reichelt has been insistent that the operator will only launch the network when it believes it is “ready”. This is critical from a customer perception point of view because Cell C only has one chance to get this relaunch right.
It’s launched an entry level bundle (USB modem and 12 months of data) for R1 499 one off. This bundle comes with 2GB of data per month for a year. It also has a more substantial offer (also USB modem and 12 months of data) for R2 999 one off. This package comes with 5GB of data per month.
This is all-in. No extra monthly fees, no line rental (as in the case of ADSL).
This all comes with a caveat though: the extent to which Cell C is able to sustain this pricing.
South Africans are understandably eager to see a prolonged price war in the mobile broadband market. For too long we’ve been subjected to the standard R2 per MB rate for mobile broadband. Cheaper mobile broadband means the prices will trend closer to ADSL pricing, even though the two are still very far apart (and, by definition, will remain different).
Murmurs from the two gorillas have suggested that we’re not likely to see that base (or out-of-bundle) rate of R2 per MB change anytime soon.
Can Vodacom and MTN react?
This is tricky. Can Vodacom and MTN cost a megabyte of data? Not really… (In the same way that Telkom is incapable of costing – to the company – the true cost of delivering an ADSL service to a customer every month.) Each will argue that they can cost services, but working out the cost of a telephony or mobile broadband service would necessarily require different brackets of users and predicated user levels (not every user on the same package uses the same amount of data/voice calls every month).
And here’s the sticking point. Sure, cheaper international (and local) bandwidth means the R2 per MB figure should trend down over time, but the larger mobile operators need you and I to use more data for that equation to balance. That’s why both MTN and Vodacom have been more aggressive with their data bundle pricing. And don’t forget the bonus of the annuity revenue!
The entire business model and underlying cost structure that Cell C has based its mobile broadband products on is different to Vodacom’s and MTN’s. And if it isn’t, Cell C is going to run out of money before it’s finished building a network. Really, really not likely. There are some seriously smart people at the third operator who wouldn’t be naïve enough to blur business models. This would be like trying to run a low-cost airline on the model of a full-service national carrier.
Remember that Cell C’s competitors’ mobile broadband networks were built piecemeal, and were forced to evolve from early 3G technology. There is a lot of legacy equipment and despite deploying fibre, both Vodacom and MTN are still very reliant on leased lines from Telkom to link their base stations.
Cell C has the advantage of being late to the party (when would you ever have thought it would be better to launch later!). They can deploy the latest base station technology (HSPA+) from the word go, as well as a fibre backbone to link those towers.
What will Vodacom and MTN do?
My guess: some serious data bundle discounting (Vodacom’s already offering customers an additional 1GB bundle of off-peak data on certain of its packages as part of a promotion).
And you can be sure Cell C’s strategy of selling a one-off bundle to consumers (with monthly data and a USB modem) has the product teams at Vodacom and MTN scratching their heads. Hopefully we’ll soon see something more innovative from them than selling mobile data by the minute or a throttled “uncapped” service?!
Why couldn’t operators spin off a new (lean) data business that would be able to move quickly and effectively (much like a big airline would spin out a low-cost carrier)? This unit would be able to wholesale data from the parent and develop new business models to suit innovative products. Just a thought.
Once Cell C’s new 4Gs network launches in a major metro, can Vodacom and MTN afford not to compete?
Can Vodacom and MTN compete with Cell C? << Give your views
*Hilton Tarrant contributes to “Broadband”, a column on Moneyweb covering the ICT sector in South Africa. He’s not holding his breath that Vodacom and MTN will blow us away with mobile broadband offers in the next six months, but he’s been wrong once or twice before…