Ignoring talk of turmoil
Cellular operator downplays talk of trouble
IS THERE A CRISIS BREWING AT Cell C? The cellular operator has in the last six months reportedly shed nearly 3% of its 2 500 workforce.
Further job cuts at senior management level are on the cards, much in line with new CE Jeffrey Hedberg’s stated objectives of streamlining the company. Cell C may well have improved earnings in its last reporting period by recording a 22% increase in revenue to R3bn, but overall it’s still battling to ring up its first hardcore profit – a development that recently prompted rating agencies S&P and Moody’s to downgrade its high yield bonds.
A joint venture (JV) signed last year with the Richard Branson-owned Virgin Mobile – Britain’s largest mobile virtual network operator – to prop up Cell C’s subscriber recruitment campaign, has yet to have a positive effect. Ironically, mobile number portability (MNP) – whose introduction Cell C championed – has turned out to be its Achilles heel. Irked by the cellular operator’s inability to offer them cuttingedge data services such as 3G and HSDPA, a significant number of post-paid users, who constitute 20% of the group’s overall 2,7m subscribers (as at August 2006) are said to have ported out of Cell C and defected to competing networks MTN and Vodacom.
Following the enforced departure of former CE Taalat Laham, who had been seconded to Cell C by its parent company – the Saudi O’ger group – whispers emanating from the Cell C corridors suggest that the Saudi O’ger group is considering divesting from the firm. Cell C management is, however, adamant that all’s well at SA’s smallest cellphone operator.
Cell C’s communications manager Vanashree Pillay says: “We’ve read some of the stuff you’re asking about in other media, and none of it’s true. Some of the figures being bandied about regarding staff retrenchments are ridiculous. Does realigning 25 creditvetting and sales positions in an internal restructuring exercise amount to a crisis? To my knowledge only 12 employees – accounting for less than 2% of our total staff complement – have left.
“Your perception that Hedberg – a former Deutsche Telekom executive known for his aggressive cost-cutting measures – is a hatchet man brought in to save a sinking ship is incorrect.”
Pillay instead blames opposition networks for some of Cell C’s woes: “There are rumours of collusion aimed at stifling our growth. Not long ago, both Vodacom and MTN went as far as attempting to delay the introduction of MNP, but they got off scot-free without any admonition by the regulator. As we speak, Cell C is owed almost R1bn in interconnect fees by MTN, but because it’s Cell C, MTN is reluctant to pay up, which it wouldn’t do if it owed Vodacom. Unlike them, we don’t have the resources for a prolonged legal battle. It’s time the regulator reined in the bullying tactics of competing networks in order to level the playing field.
Pillay is equally dismissive of suggestions that the cellular firm had lost a significant number of high value subscribers. “It depends on one’s source of information.” According to Pillay, statistics recently provided to Cell C by the more credible central reference database shows that of the 33 000 people who ported at end February 2007, Cell C lost about 13% and gained 40%, giving it a net gain of 27%.“The contention that we lost a number of high-end users because we couldn’t offer them a broad range of data services is not based on fact. Our research has shown that only 10% of our subscribers use data services and we have got Edge for our more sophisticated data users. For us, voice and data services remain the most widely used services among our subscriber base; we don’t see the need to launch a 3G or HSDPA network. To date both Vodacom and MTN have yet to justify their business case for 3G.”
Whether Pillay’s sentiments are meant to paper over the damaging leaks is hard to tell, but telecoms analyst André Wills adds an independent view about Cell C’s reported woes and the confusion surrounding MNP. Will believes that Cell C has battled to break even owing to the competitive nature of the local cellular market.
“Cell C has done reasonably well, considering that it was launched years after both Vodacom and MTN had been firmly entrenched in the local market. Cell C could have taken advantage of MNP to gain considerable market share, but for a lack of cutting-edge data services such as 3G and HSDPA,” says Wills, adding that the amount of revenue that Vodacom and MTN generate from data services makes a compelling case for offering these services. “By deploying 3G networks, Vodacom and MTN have satisfied demand ahead of time.”
Says Pillay: “Whatever the merits of 3G and HSDPA, we’re not looking to deploy a new generation network anytime soon. Our new CE is focused on building a strategy that’ll offer pre- and post-paid users the kind of service they’re looking for. We undoubtedly have the best call rates, and these could even be lower were it not for the high interconnection fees charged by competing networks.”
Pillay dismisses rumours that the Saudi O’ger group was considering divesting from Cell C and assures cynics that the Hedberg-led management team is on course to reversing the fortunes of the company.
She parts with: “Let’s wait and see what the next set of results looks like.
Is he the hatchet man? Jeffrey Hedberg