Cell C CEO embraces becoming an MVNO

New Cell C CEO Jorge Mendes is upbeat about following in Virgin Mobile’s footsteps by offering mobile services without having their own network.

Virgin Mobile was South Africa’s first mobile virtual network operator (MVNO) – a service provider that does not own the network infrastructure over which it provides services.

Cell C used to own and operate a national mobile network with thousands of towers and base stations.

However, the high capital expenditure needed to maintain mobile network infrastructure crippled the operator and left it with an unsustainable debt burden.

In mid-2019, Cell C embarked on a turnaround strategy, focusing on operational efficiencies, reducing operational expenditure, and optimising traffic.

Blue Label Telecoms helped Cell C conclude a recapitalisation process which improved liquidity and ensured its long-term sustainability.

As part of its turnaround strategy, Cell C switched off its radio access network (RAN) which reduced its network investment spend and improved operational efficiency.

In June 2023, Cell C completed its network migration. It signed a roaming agreement with MTN and Vodacom and now uses their networks to offer mobile products.

Cell C’s contract and broadband customers use Vodacom’s network, while its prepaid customers use MTN’s network.

Vodacom said Cell C does not own any of the wireless network infrastructure used to provide services to its contract subscribers.

MTN, in turn, is using Cell C’s spectrum in the 900 MHz, 1,800 MHz and 2,100 MHz bands as part of its “virtual network” offering to Cell C subscribers.

The strategy to become an MVNO is part of Cell C’s vision to differentiate itself “by focusing on innovative products and services without being owners of capital-intensive infrastructure”.

Competing against Vodacom and MTN as an MVNO is not easy. Virgin Mobile tried to make it work for fifteen years, but it closed its doors in 2021 after failing to become profitable.

However, Mendes is upbeat about Cell C’s prospects. He shared his vision in a column published in the Sunday Times.

“After one month in the seat gaining insights into the unique strengths and challenges at Cell C, I can confidently say the opportunity exists to rewrite the story,” he said.

Mendes said the industry is ripe for their ambitious turnaround plan, which includes a capex-light network strategy and business model.

“The market is made up of those that own infrastructure and those that buy it. Owning infrastructure is no longer the only measure of competitiveness,” he said.

Mendes said their network strategy and roaming agreements benefit Vodacom and MTN as it provides a new revenue stream to contribute to building their networks.

He argued that South Africa is fully covered with 3G and 4G, which makes it unnecessary for them to build the same network to serve their customers.

Through their partnerships, they have access to circa 14,000 towers countrywide, with more than 13,000 4G/LTE-enabled sites on the MTN network and 14,000 on the Vodacom network.

“The beauty of this arrangement is that we no longer have a network deficit. And everyone wins,” Mendes said.

Not having a network means Cell C has become a pure-play digital service provider – exactly where it wants to play.