Cell C’s boss is eying as many as 10-million additional customers for its mobile virtual network operator business.
Mobile virtual network operators, or MVNOs, constitute about 2% of total mobile services in SA. They are usually non-telecom businesses that lease network infrastructure from mobile operators to sell data and voice services to their customers.
The business has been a differentiator for Cell C over the years.
“If you look at our MVNO strategy, we’ve got all the right ingredients with our partners,” CEO Jorge Mendes told Business Day this week.
The largest player in the segment is FirstRand’s retail bank FNB, with almost 1-million customers. Capitec says it has issued more than 1-million SIM cards since its launch in 2022.
“We’ve got two big banks. We don’t have a strong set of financial services products and so we don’t want to compete with them,” Mendes said.
“That’s the reason we’ve got such great partnerships is that we can take our telco strength and experience combine it with their banking strength and experience.
“Capitec, as an example, has 21-million retail banking customers. If we can give them voice, data, electricity and banking services all in one, it’s an amazing proposition that is very difficult to compete with.”
Cell C — its network is used by FNB, Capital, Standard Bank and Mr Price — has been the biggest MVNO provider for several years, but is facing growing competition from larger mobile operators, which have been mandated by the government to offer similar services.
FNB recently signed a contract with MTN to use its network in addition to Cell C. MTN also provides MVNO services to Pick n Pay’s mobile offering.
Nonetheless, Mendes sees Cell C’s ties with three of SA’s largest banks its way of remaining relevant in a market where Vodacom and MTN have secured lucrative contracts with financial services firms.
“When you look at the capability of loans ... that road map is quite long and you can have financing of handsets, you can have all sorts of things that could be down the road. So I really think we are set up nicely to own the MVNO space,” he said.
Banks and telecom operators have been competing for the same customers in recent years as mobile operators double down on financial services, driven by mobile payments as a new growth area in the face of falling mobile and data revenues.
“I firmly believe that the big operators in particular ... do not genuinely want to embrace MVNOs because it will cannibalise their business too much. So at best they might go into a friendly MVNO space. We want to be deliberate, we want to be aggressive and we want to disrupt,” said Mendes.
“I would say anything from a minimum of 3-million to somewhere around 10-million is what the journey could take us to in terms of customers that could switch just to an MVNO space.”
Philip Short, an analyst who has covered Blue Label and Cell C for a number of years, has said he sees Capitec’s decision to partner with Cell C on its MVNO as a good sign.
“Capitec is moving into the telco space; a trend we’re seeing globally where banks and telcos are offering a combined set of services,” he said. “Capitec is going to be a strong partner for Cell C and gives Cell C access to its banking clients via Capitec Connect, a Cell C MVNO.”
For the nine months to September Cell C's revenue amounted to R10.09bn, down slightly from the R10.14bn reported for the same period a year earlier, though third-quarter revenue alone increased by 1.5% or R50m year on year.
The increase was attributed an improvement in the group’s prepaid business, and continued growth in wholesale, postpaid and equipment sales.
Cell C’s move away from operating its own network infrastructure, has seen the value of property, plant, and equipment decline by R1bn.
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