Cell C has become a Vodacom MVNO for its contract customers
Cell C is winding down its contract base and has become a mobile virtual network operator (MVNO) on Vodacom’s network to serve these subscribers.
An MVNO is a wireless communications service provider that does not own the wireless network infrastructure over which it provides services to its customers.
In January 2021, Cell C surprised the market when it announced that it had started to move its contract and broadband subscribers to Vodacom’s network.
Cell C has an extensive national roaming agreement with MTN, giving it access to MTN’s 3G and 4G radio networks.
It uses its spectrum on a virtualised radio access network on MTN’s infrastructure as part of the agreement.
Cell C also maintains its IMSI range, core data, voice and transmission network and own billing platform.
The technology used on the virtualised radio access network is known as Multi Operator Core Network (MOCN), which is not the same as traditional roaming.
With all this technology in place, it was unexpected for Cell C to move its contract and broadband subscribers to Vodacom’s network instead of using its own network.
Vodacom confirmed that Cell C does not own any of the wireless network infrastructure used to provide services to its contract subscribers.
Cell C is, therefore, by definition, an MVNO on Vodacom’s network to service its contract and broadband customers.
Industry players Daily Investor spoke to, including executives from South African mobile operators, confirmed that Cell C is an MVNO on Vodacom.
Curiously, Cell C CTO Schalk Visser and a Vodacom spokesperson denied that Cell C is an MVNO.
Visser told Daily Investor that Cell C maintains its identity as a mobile network operator without referencing the definition.
Vodacom could not explain why it said Cell C is not an MVNO. It only said, “Cell C has a roaming arrangement with Vodacom”.
Daily Investor asked Cell C for further information about winding down its contract base, but the operator preferred not to answer this question.
Cell C would also not comment on its roaming agreement with Vodacom.
Secret deal with Vodacom
When Vodacom and Cell C were asked for details about the roaming agreement, they said they could not discuss the issue.
Vodacom said it was contractually precluded from commenting on anything related to the agreement.
Cell C, in turn, said, “market and competitor sensitive information will not be shared with media on the execution of these commercial agreements”.
The secrecy around the deal sparked industry speculation that there was more to it than meets the eye.
In January 2020, Bloomberg reported that Vodacom was in talks with Cell C about buying its contract customers.
The deal made sense for Vodacom as it would gain over a million high-paying subscribers to strengthen its position as a market leader.
Blue Label Telecoms also revealed in its financial reports that it had the right to sell the customer base in the event of default from Cell C.
However, there was a problem. A sale would require the companies to file a merger notification with the Competition Commission, which would face tremendous scrutiny.
Cell C, its main shareholder Blue Label Telecom, and Vodacom vehemently denied that the contract base had been sold.
Project Boston
Last year, Blue Label Telecoms revealed the existence of “Project Boston” in its annual results announcement.
Blue Label said Cell C faced a 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 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.”
Blue Label revealed that Cell C uses managed services support for back-office functions related to servicing its postpaid base.
CEC performs certain services 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.
Project Boston has also rewritten the way CEC funds handsets to Cell C subscribers. “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 the overall data-driven approach to the postpaid business, CEC intends to reduce bad debt risk and realise the benefits,” Blue Label said.
This was first published by Daily Investor and is republished with permission.
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