Cell C move sparks price war

2012-05-27 11:21

Johannesburg - There’s a price war raging between South Africa’s cellphone networks after Cell C lowered the rates of its prepaid calls by more than 34%.

Last Thursday, Cell C, the third most popular cellular network provider, announced a new product – 99 Cents for Real – with which users can phone any network at any time for 99c a minute. The cost of the calls is measured per second.

It took Vodacom Group [JSE:VOD] only a few seconds, literally, to strike back with its Freedom 99 product, which also offers calls to any network for 99c a minute. But unlike Cell C’s offer, its cost of calls is measured per minute.

These price cuts mean that prepaid users pay less than contract users pay.

Cell C is planning to correct this situation with lower contract fees, says Cell C chief executive Alan Knott-Craig.

“We have already devised new, cheaper contract products which will be introduced in the next few months,” he said.

The purpose of the price cuts, Knott-Craig says, is not to start a price war, but to extend Cell C’s market share. “Lower prices are one way of achieving this.”

He says the price cuts were done in anticipation of lower interconnection rates to be prescribed by the Independent Communication Authority of South Africa (Icasa).

The interconnection rates are the amounts that networks pay one another to handle each other’s calls. These were recently reduced from 89c a minute to 73c a minute by Icasa. By next year, they will be down to 40c a minute.

Vodacom spokesperson Richard Boorman says their network has no immediate plans to reduce contract prices.

“But our prices are constantly being revised to ensure we remain competitive,” he says.

Vodacom’s Freedom 99 product has been available since last Sunday.

Boorman says the product also offers free calls between midnight and 7am.

Arthur Goldstuck, managing director of research company World Wide Worx, says the price cuts are among the biggest in the past decade.

“The reductions are impressive,” he says. “In addition, the products have been made as simple as possible so that users know exactly how much they are spending when they make a call.”

No distinction is made between networks or peak times, and the rate is charged according to a fixed time, says Goldstuck.

He adds that it’s logical that contract rates will have to be lowered in order to keep valuable contract customers happy.

Goldstuck says he thinks Cell C lowered its prepaid prices firstly to make it easier for the prepaid market to move over to Cell C, which would allow it to gain market share.

AppChat founder John Holdsworth says prepaid users should be excited about the lower prices. “Users have in the past had very little faith in cellphone companies because they pay hopelessly too much for cellphone calls.

“Cell C’s announcement is the first step towards regaining users’ confidence. I hope users will reward Cell C’s vision and courage by switching to Cell C.

Alison Gillwald, director at Research ICT Africa, says there is a direct link between lowering the cost of calls and lower interconnection rates.

In other countries, like Namibia and Kenya, the lowering of interconnection rates also ledt to a cut in call fees, she says, adding: “The result is more subscribers phoning for longer, which ultimately translates into higher profits.”

According to Gillwald, calls in South Africa were very expensive before these recent price reductions. A study by Research ICT Africa, released last month, reveal that South Africa is ranked 19th on a list comparing call fees in Africa.

MTN Group [JSE:MTN] and 8ta, which are owned by fixed-line operator Telkom [JSE:TKG], have so far refused to join in the price war. MTN spokesperson Serame Taukobong says their customers “could rest assured” their prepaid rates are still the most affordable in the market.

MTN offers free calls at certain times of the day. “We believe our competitors’ prices are uncompetitive because they are not based on our clients’ use of the network,” says Taukobong.

8ta chief executive Amith Maharaj says their prepaid rates are affordable, bearing in mind that their customers get additional free airtime when they make calls. 

  • Roelof.Richter - 2012-05-27 12:28

    Thumbs up to Cell C

      Fredster - 2012-05-28 08:20

      ...and they still make a good profit...just imagine how much they nailed the public for before the price cut

      Utopian - 2012-05-29 08:29

      MTN have just established a complete network infrastructure in Sudan and prepaid subscribers only pay 5c per minute for calls to all networks. I queried this and was told that the prices are so much lower than in SA because the per capata salary in Sudan is considerably lower than in SA. Basically they can still make a profit at 5c a minute but because people is SA earn more they should be ripped off because of it. Viva Cell C viva

      james.m.wood.773 - 2012-08-14 10:47

      Looks like I'll be migrating from mtn if they don't want to change their contract prices, we are their bread and butter

  • STEPHANIE.TEALE - 2012-05-27 12:40

    Aghhh this makes me sick to my stomach, us guys who are contracted to vodacom ..etc.... we get left out in these price war factors..nothing for us who pay up front...for I might add I have been doing for 17 years...and what do we get NOTHING !!!!!!! WAKE UP !!! WE ARE YOUR CUSTOMERS..STOP RIPPING US OFF!!!

      Randomhero6661 - 2012-05-28 15:51

      get out of the contract. Keep your number

      daryltt - 2012-05-29 13:10

      Irritates me also! I'm definitely not renewing my contract with MTN. I'm stuck paying more than double! R2.50 per minute. That's not ayoba.

  • eugene.meyer1980 - 2012-05-27 12:43

    Im very keen to join Cell C. MTN has been nothing but a disappointment. Its expensive, and crap reception. Most of the time my 3G runs EDGE, my Smartphone runs on EDGE 80% of the time and the reception when I travel around this country is crap. I might have better luck with a pigeon.

      Hugh - 2012-05-28 20:52

      Yes MTN is definately not as competitive as it makes out. Theire= so called free Thursdays top up are a complete waste as they can only be used for same network.

      camp.j - 2012-05-29 10:07

      At Hugh, ofcourse they apply to MTN network, read the article, Interconnect fees dude!

  • thabo.manganye - 2012-05-27 13:12

    well, so the other operators are feeling the heat. what a shame, all they care about is 10digits profits, if they can afford it profitablby then let it be. big up to cell ... C will be joining you soon

  • Greg - 2012-05-27 13:19

    Vodacom called Cell C the C Team earlier this week.

  • Gregory Jurgens - 2012-05-27 13:25

    Off to buy a cell C sim.

  • Cassandra Eileen Olivier - 2012-05-27 13:28

    MTN is the best network out there

      thabo.manganye - 2012-05-27 14:46

      thats your opinion but for me MTN is crap, been using their services for some time now but i tell you i am one hell of an unhappy ey, maybe you dont have better things to do with your money, some of us we save for holidays during the festive season but you donate to MTN. we different hey.

      mastersvoice - 2012-05-27 21:50

      If that is true, then the other networks are truly rubbish, because I've been with MTN for many years now, and their service has never been this poor. I think I should take a look at what Cell C is offering...

      skootzie - 2012-05-29 09:52

      MTN still haven't released the latest Android Update (IceCream Sandwich) to it's Android users; Vodacom did it on 17 May (day after release), CellC did it on 16 May (day OF release). MTN network is shoddy and poor; a friend recently went camping with a group of friends, he was 1 of 5 people with MTN sims and they were the only ones without signal (not so much as a single bar GSM). Tell me again how MTN is the best network out there?

      Kenny Grass - 2013-04-19 17:45

      Are you on drugs? Get a calculator or go back to school.Let me help you Cell C is the best deal by far.

  • gift.moyo.52 - 2012-05-27 13:28

    I 've been planning to cancel my vodacom contract and port my number to 8ta. I 'm now gonna wait a couple of weeks to see how this price war pans out as cell C are now in the mix. To vodacom, I say, "rest assured I will leave you robbers and I 've already started limitting calls to friends and family on your thieving network thanks to whatsapp and bbm"

      Genet - 2012-05-28 14:55

      I am on 8ta pre paid, and I get so many free minutes credited to me from people calling me that I hardly ever have to top up my airtime. But i would also wait and see what the other providers come up with.

  • braamc - 2012-05-27 14:40

    I am moving from the thieving yellow

  • James - 2012-05-27 18:24

    So if MTN aren't going to make it worth while for their contract subscribers what do they think is going to happe,. looks like I will be moving from an MTN contract to cell c (for yourself) pre-paid. Its about time these guys get their act together, a price was is the onl way, now if only we had another electricity provider!!!!!!

  • leoa.martins - 2012-05-28 07:54

    How about reducing internet rates since we are being RAPED when it comes to internet connectivity.

  • leoa.martins - 2012-05-28 07:54

    How about reducing internet rates since we are being RAPED when it comes to internet connectivity.

      Johan - 2012-05-28 09:15

      check the adds, data is also charged at 99cPM...

  • pk.kekana - 2012-05-28 09:45

    Its about time, good move Alan-Knott Craig!

  • Bruce - 2012-05-28 11:40

    It's actually so sad to see people getting happy about this. As if Cell C or any other provider is doing us a favour. MTC Namibia, who has 90% of the 2.1 million subscribers in that country, practically no competition(SA is on 30mill+), has been charging charging half of this for years. It's no small country either and providing to a population half the size of Cape Town in that size means you've got more towers for fewer people. We're still the chumps.

  • Zanele - 2012-05-28 12:12

    Well if MTN is not joining this price war then its goodbye from me...hell i'm done with your rip offs. Cell C here i come.

  • rudi.debeer.5 - 2012-05-28 13:10

    Logic says that prepaid should be cheaper anyway.No risk to the service provider and they have the money in advance.

  • Heinrich - 2012-05-28 14:27

    To all who are moaning about contract costs being more than prepaid. You signed a contract!!! stop moaning!!!!

      tamarin.nelvanzyl - 2012-05-28 16:22

      Heinrich we are moaning because signing a contract means that we will be loyal for the next 24 months, unlike people on prepaid, who can leave any day. We are moaning because we thought that by signing a contract we would getting better prices. So your comment is rather unnecessary.

      my10cent - 2012-05-29 09:09

      @Heinrich, they took the contract for the fancy smartphone, which they only use for BBM and Facebook anyway. The benefit of pre-paid is that one can actualy MAKE A CALL at cheaper rates instead of texting - ha,ha,ha

  • tamarin.nelvanzyl - 2012-05-28 16:18

    well done cell c! obviously Vodacom will not change their contract prices because they are the most expensive network and the fat cats at the top enjoy their bonuses to much to have ANY price cuts. Moving away from Vodacom ASAP.

  • Ettiene - 2012-05-28 16:24

    They can make it as cheap as they want, but their reception ans stability will always remain CRAP!! Can't wait for my contract to end so I can port to MTN or Vodacom. I don't mind paying more if it means better reception, stable and fewer dropped calls. Who do you think is better? MTN or Vodacom?

      tamarin.nelvanzyl - 2012-05-28 16:27

      Ettiene, don't expect better or stable reception from Vodacom either. Calls get cut off for no reason even if you have reception anywhere. I'd go with MTN.

  • akesh.singh.94 - 2012-05-28 22:12

    How on earth do Vodacom expect to remain competitive where Cell C bills per second and they build per minute ??? Somebody pls help me understand this.

  • Sean - 2012-05-28 22:42

    over the past 6 years MTN has gone from great service to truly shocking service. My contract up for renewal just now. I will be moving to either 8ta or Cell C. I have a Cell C sim in my Ipad a Vodacom sim in my laptop and a MTN Blackberry. Only Cell C gives me some much speed for web browsing and I believe 8 ta is also brilliant. Ciao MTN & VODACRAP.

  • ccpvandam - 2012-05-29 08:34

    How long has the SA consumer been ripped off?? Its about time prices are reviewed. In the UK I get 15G for 15 pounds, in SA my contract with vodacom is 600 megs for R200...I get it cant be the same, but i feel I have been screwed over the past years, VIVA Cell C VIVA! my next contract is with U!!!!!!!!!!

  • my10cent - 2012-05-29 09:01

    Just a pity their service SUCKS!!!

  • belinda.ober - 2012-05-30 01:11

    My friend G syas to go wthh what Arthur Goldstuck says... Ather stuck gold even before he was borne!!! B

  • Barry Potgieter - 2013-03-28 19:27

    Thanks Cell C, from one of your oldest Customers since your Inception.

  • Ncube Tseke - 2013-04-19 09:44

    That is good for the South African communication market as we consumers we will start having no burden of high cost of calling and use of mobile phones, competition is good for the consumers even though others takes it hard.

  • Chris Shelver - 2013-04-23 14:54

    I spend thousands with MTN on a contract basis, 5 months for the contract to be over and then its Cell C Prepaid for me. Well done Cell C for making this possible.

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