Selective memory from Cell C CEO

People who live in glass houses shouldn’t throw stones. But Alan Knott-Craig, founder and former CEO of Vodacom and current Cell C boss, seems to be intent at heaving rocks at a glass house: one that he built!

In a recent interview with Techcentral, Knott-Craig criticises Vodacom and new CEO Shameel Joosub for its reaction to Cell C’s 99c per minute international call tariffs. Vodacom was set to launch its response, an 89c per minute deal to 51 destinations on Monday but had to postpone it at the last minute due to worries over its billing system.

It’s Vodacom’s R5 activation fee that drew the sharpest criticism from Knott-Craig. “Why [force] opt-in? Opting in is like opting out. If you are serious, give it to everyone. Why pay R5? You’ve screwed [customers] long enough. Let them keep their R5,” he told Techcentral.

In fact, Knott-Craig’s been particularly vocal in the past fortnight, flinging rocks at whomever he can. Interviews are peppered with jabs, particularly at Vodacom. This is no surprise, given that he knows the business inside out.

But his competitors know as much about him. Joosub was hired by Knott-Craig, worked for him for 13 years, and surely knows his weaknesses? Karel Pienaar, MTN’s South African MD was the other pioneer, at the time that the two cellphone companies emerged in the early nineties. He also knows where Knott-Craig and Cell C are vulnerable.

It’s not as if his tenure at Vodacom from 1993 to 2008 was all roses. The serious animosity between the top brass at Telkom (then 50% shareholder) and Vodacom is legendary, especially in the mid-to-late 2000s.

Since joining Cell C, Knott-Craig has continually slammed his rivals’ tariffs. Another dig from the Techcentral piece: “We must be the highest-margin telco country in the world.”

There’s selective memory at play here. Tariffs (especially voice charges) remained stubbornly high for over a decade until a few years ago. Who’s fault is that?

Suddenly, after he’d left Vodacom in 2008, Knott-Craig became vocal about interconnect tariffs. This public debate in 2009 saw him sitting on the sidelines slamming the rates.

But, here again there’s smoke and mirrors. Soon after the licensing of Cell C – and before its launch – Vodacom (under Knott-Craig) and MTN successfully lobbied Icasa to raise interconnect rates to R1.25 per minute. This meant that at its launch in 2001, Cell C was already hamstrung and has found it nearly impossible to compete with its entrenched rivals ever since.

He defended Vodacom’s inaction (from the sidelines) in 2009: “I mean, in the last years that I spent at Vodacom I think I budgeted every single year for Icasa to cut that interconnect, and they never did. Yes, my shareholders would say “happy days”.”

In an interview with MyBroadband, also in 2009, he states: “I have never changed my mind on interconnect rates. My position has been the same since 1993. Mobile terminating rates should be based on cost plus a fair profit.” There’s no explanation of the sudden jump in interconnect just before Cell C’s launch in 2001.

Vodacom had the most to lose from a drop in interconnect rates, and Knott-Craig is naïve to assume no one else knew that. In the first six months following the drop in interconnect rates, Vodacom saw R800m in revenue evaporate. One wonders what Knott-Craig’s position would’ve been had he still been in the Vodacom CEO’s chair at the time of these changes. Behind the scenes both operators fought tooth and nail to retain the status quo, before Icasa’s ruling on interconnect in April 2010.

Even today, he remains critical of the glide path for mobile termination rates imposed by Icasa, arguing for asymmetrical rates which would benefit a smaller operator (like Cell C).

There are any number of other missteps at Vodacom. The aborted entry into Nigeria, the iBurst acquisition, Vodacom Business Yebo Radio, the list goes on. But, under Knott-Craig, there were perhaps even more successes at Vodacom. That’s precisely the point. Every chief executive has failings and successes. They just need to make sure they have more successes than failures and that they’re remembered for the good parts. It’s easy to fling mud at others, especially if you know everything about that company. And it’s even easier to be selective about what you criticise and how.

Knott-Craig is a ferocious competitor, that’s for sure. We should be thankful that executives of his calibre (and Lars Reichelt before him) took the bold steps at Cell C that have made the mobile industry infinitely more competitive than it was two years ago.

And there’s more to come. By the end of next year, mobile voice, SMS and data tariffs will be unrecognisable from what we’re paying today. The competitive landscape too will look different. Over the next year or two, the market share of Vodacom, MTN and Cell C will morph from the current 50/35/15 (round numbers) to a situation of 40/35/20/5 (again, round numbers, with 8.ta taking a small share of the market by then).

Joosub at Vodacom and Pienaar at MTN are more than up for Knott-Craig’s fight.

This is great for consumers. And for that we should be thankful.

But please Alan, tone down the sabre-rattling a little.

Source: Moneyweb

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