Vodacom and Cell C have reached a secret agreement which is behind the recent migration of Cell C’s contract and broadband user base to Vodacom’s network.
On 13 January 2021, Cell C sent out a statement which announced: “the migration process has started with contract and broadband customers”. This was a month after the migration actually started.
What Cell C omitted from its press statement, and which surprised its subscribers and the market, is that it migrated its contract subscribers to Vodacom and not MTN, as expected.
Cell C already has a national roaming agreement with MTN, and it is currently building a “virtual network”, using its own spectrum, in partnership with MTN.
This raised the question why Cell C would prefer to roam on Vodacom’s network instead of using its own network.
It is also strange that Cell C would move its contract and broadband customers to Vodacom while keeping its prepaid subscribers on MTN’s network.
For Cell C to operate its own network and maintain roaming agreements with both Vodacom and MTN, instead of just MTN, creates unnecessary complications.
It also does not make financial sense. It is always cheaper to use your own network and spectrum than roam on another operator’s network.
Cell C would not say why it selected Vodacom over MTN. Instead, it stated that “the migration of the contract and broadband customers arises from Cell C’s network roaming agreement with Vodacom.”
It added that buying more capacity from both Vodacom and MTN is in line with their strategy of becoming a significant wholesale buyer of network capacity and infrastructure services.
This statement did not cut the mustard, and industry players started speculating that Cell C sold its contract subscriber base to Vodacom.
It is no secret that Cell C previously considered selling its contract and prepaid subscriber bases to raise capital for the business.
In January 2020, Bloomberg reported that Vodacom was in talks with Cell C about buying its contract customers.
This deal made sense. Vodacom would gain over a million high-paying subscribers to strengthen its position as a market leader, and Cell C would get the vital cash injection it desperately needs.
There was, however, a problem. A sale would require the companies to file a merger notification with the Competition Commission, which would face tremendous scrutiny.
The deal could also jeopardise Vodacom and Cell C’s respective spectrum applications.
Vodacom and Cell C denied that any subscribers were sold, which means an official sale was not concluded.
The current roaming deal could obviously have been structured in a creative way to hide what is effectively a subscriber base sale to avoid regulatory hurdles, but there is no reason to believe it is the case.
MyBroadband asked Vodacom and Cell C whether they were in discussions regarding the sale of Cell C’s contract subscriber base, but they declined to comment.
It is all about spectrum
With Vodacom and Cell C dismissing rumours of a subscriber base sale, it once again raises the question of why Cell C moved its contract subscribers to Vodacom.
The answer, like many other developments in the mobile market over the past few months, may lie in the planned spectrum auction.
There are six applicants which responded to ICASA’s Invitation to Apply (ITA) for the IMT spectrum – Cell C, Vodacom, MTN, Rain, Telkom, and Liquid Telecom.
Successful applicants will get access to valuable spectrum, including 700MHz, 800MHz, 2,600MHz, and 3,500MHz.
Spectrum is the lifeblood of mobile connectivity, and the operator with the most spectrum has a big advantage over its competitors.
Cell C has already committed its current spectrum to build a radio access network (RAN) on MTN’s infrastructure. However, any new spectrum it gains through the new ITA is up for grabs.
But Cell C has a problem – it does not have the money to bid in the spectrum auction.
Vodacom, in turn, has lots of money and want as much spectrum as it can get. And this may be exactly what is behind the surprising roaming deal between Cell C and Vodacom.
A commitment from Vodacom to help Cell C to fund its spectrum auction and build a new RAN will benefit both operators.
Vodacom’s partnership with Rain provides a blueprint of how Vodacom can integrate Cell C’s new spectrum into its network without regulatory problems.
Such a deal would put Vodacom in an excellent position to benefit from the new spectrum auction.
Vodacom already has managed network services and roaming agreements with Telkom, Rain, and Liquid Telecom. Adding Cell C to this list means it will have agreements with all the new spectrum applicants, except for MTN.
If Vodacom and Cell C did indeed strike a deal involving Cell C’s spectrum, as suggested by industry speculation, they will have to keep it a secret to avoid potential repercussions related to the ITA rules.
Trying to get information from Vodacom and Cell C about their roaming agreement is near impossible.
Vodacom has even declined to comment on the most basic technical aspects of the roaming agreement and how it affects Cell C subscribers.
It told MyBroadband it is contractually precluded from commenting on the details of its agreement with Cell C.
When asked whether it is planning to help Cell C to build a new RAN, Vodacom said “we do not comment on market speculation”.
Cell C, in turn, said “market and competitor sensitive information will not be shared with media on the execution of these commercial agreements”.