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From telco to techco

Joanne Carew
By Joanne Carew, ITWeb Cape-based contributor.
Johannesburg, 14 Sept 2021
Schalk Visser
Schalk Visser

Cell C entered the telco market in 2001, seven years after the launch of the two incumbents, Vodacom and MTN. That’s a pretty big head start, and that period of market dominance gave Vodacom and MTN the liquidity to reinvest in, and expand, their network infrastructure, boosting coverage and improving quality by doing so. As Alison Gillwald, the executive director of Research ICT Africa, explained last year, the dominance of the incumbents in the wholesale market prevents the late entrants, like Cell C and Telkom Mobile, from competing fairly. This situation allows more established players to dramatically reduce prices in order to attract price-sensitive consumers, leaving the younger networks unable to compete on price or quality.

So, what do the smaller operators do? They reinvent themselves.

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According to Africa Analysis, 5G network coverage will reach 60% of South Africans by 2030. It estimates that if all mobile operators decide to build networks of the same size (based on population coverage), as well as the Wireless Open Access Network, the total cumulative capex over a five-year period will exceed R240 billion.

For Andre Wills, MD and lead analyst at Africa Analysis, this calculation underlines the importance of network-sharing because it reduces the capex required to enable a strongly competitive 5G market in South Africa.

Cell C’s annual financials outline that the company would need to invest as much as R12 billion per annum in capex over 18 years in order to catch up to the big infrastructure players. This is assuming it could build around 400 new sites each year.

“If you look at where we started, it used to be a big deal to just share a single physical mast,” says Schalk Visser, Cell C’s CTO. But as technology has changed, the industry’s attitude around sharing infrastructure resources has also changed. This approach is especially practical given the scale of new transmission infrastructure, which includes thousands of cell towers and tens of thousands of antennae, needed to make widespread 5G a reality. “The telco industry in South Africa is shifting; it has to. With 5G, the cost of doing everything on your own is prohibitive. And with such an extensive infrastructure rollout, you get allocated a massive amount of bandwidth to use. No single operator will be able to monetise all that bandwidth, which makes infrastructure-sharing incredibly practical.”

From a network and IT perspective, Cell C’s new network strategy has cut its capex costs by around 60% and freed up budget to spend more on the platforms and services offered on top of connectivity.

A frog out of water

Visser likens Cell C’s business reinvention to the story of the frog that finds itself in a pot of water on a stove. As the water temperature rises, the frog simply adjusts its body temperature, but eventually, the water reaches boiling point and the frog is boiled alive. It’s a bit of a morbid story, but the message behind it is clear – we all need to adjust according to the scenarios we find ourselves in, but there are times when we must face the situation head-on and take appropriate action before it’s too late, he says. If anything, the pandemic has shown business just how much is possible when there’s no other choice. It’s something that Visser believes Cell C is all too familiar with.

“I don’t know of any other mobile network operator in the world that has switched off its radio network. While it may have been borne out of necessity, by doing so, we have access to network infrastructure equivalent to that of our bigger competitors and we can offer our customers a better service.” To date, it has already transitioned 34% of its network, with plans being to completely eliminate the Cell C network by December 2023.

I don’t know of any other mobile network operator in the world that has switched off its radio network.

Schalk Visser, Cell C

The reinvention and new network strategy is proving to be a smart strategic play, but he admits that a fair amount of hurdles had to be overcome to maintain its MNO identity. “There was a need to change on multiple levels. We had to rethink our culture, we needed to bring in new capabilities and engage with our customers in new ways.” He cites fresh talent as a major competitive advantage. “We’ve been a telco for 20 years, so we think like a telco. This is why we need to reskill our existing employees so that they understand what the future business will look like. In addition, we need to acknowledge that we won’t always have the expertise on the inside, so you have to bring new skills onboard. From my experience, we’re getting the biggest benefit from welcoming these new perspectives into the organisation.”

Inspired by digital beauty brand success

When asked what kind of digital ecosystem Cell C wants to create, Schalk Visser mentions Glossier, a digital-first beauty company. Founder Emily Weiss went from a beauty blogger to a billion-dollar CEO by using digital to really connect with, and listen to, customers. One of the foundations of the brand’s success is community. It has successfully created a community of consumers who promote Glossier products by sharing digital content on social networks and help one another discover the beauty products they need. In addition, Weiss has transformed the beauty product development process by co-creating products with customers or changing up existing products based on her audience’s experiences. 

That’s fitting given the fact that customers have changed too. Telcos have been known to brag about being the first to release new technologies, be it the first 3G, LTE or 5G sites, says Visser. “But today, it’s less about the technology and more about understanding the core requirements of the customer and how we can tailor our services to better address those needs. It’s not just about putting a product out and hoping people buy it,” he says. Traditionally, devices acted as the carrot telcos used to attract customers, but now, customers are swayed by the services bundled along with a device. As part of the reinvention, Cell C wants to be a ‘digital-first ecosystem player’, offering a diverse portfolio of lifestyle solutions and services to their customers.

There are some very ambitious goals in terms of what the company wants to achieve as a digital organisation. “For years, we’ve been trying to play catch-up,” says Visser. “But if we stand back and look at the business and the financial performance in the old model and compare it with the new model, it answers the question about whether or not we’re on the right track.”

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* Article first published on brainstorm.itweb.co.za