South Africa’s Cell C targets mobile rivals

(Reuters) – South Africa’s third-largest mobile phone operator, Cell C, is adding about 700,000 new subscribers a month after sharp price cuts to take market share from bigger rivals MTN (MTNJ.J) and Vodacom (VODJ.J), its newly appointed head said on Monday.

The unlisted company, in which Saudi Telecom 7010.SE has an indirect stake, plans to have up to a quarter of South Africa’s mobile subscribers in four years from 13 percent now, Chief Executive Alan Knott-Craig said in an interview.

The company cut prices in May to help it win more customers from heavyweights MTN, Africa’s top mobile operator, and Vodacom, a unit of Britain’s Vodafone Plc (VOD.L).

“In terms of new proper customers, we have signed up about 700,000 a month,” he told Reuters at Cell C’s offices in suburban Johannesburg.

The company currently has about 9 million subscribers, or about 13 percent of the market, he said adding that some of them were so-called “phantom users” who don’t use their phones and need to be weeded out.

The majority of new users are pre-paid customers, he said.

Knott-Craig, a well known figure in South African telecoms, came out of retirement in April to fix up Cell C, which had struggled to gain market share.

He helped found Vodacom in 1993 and then served as its chief executive for over a decade.

It is too early to tell how much of an impact Knott-Craig’s strategy is having, said Thato Mashigo, an equity analyst with Cadiz Asset Management.

“The big thing will be to wait and see what effect they’ll have on contract subscribers. That we’ll only really see over 24 months period while you wait for people to get off their contracts,” he said.

Cell C is rolling out between 120 and 150 new base stations monthly to cover 98 percent of the population by January 2013.

It received a $180 million cash injection from parent company Oger earlier this year with which it hopes to increase base stations to a total of 5,500 in a year’s time.

Knott-Craig declined to say how much the operator would spend on the expansion program but said it would need another 2 billion rand in financing, all of it already in place through rolling bank facilities and vendor financing.

“We would have to raise some more, but it’s not new money to be raised, it is money that was already being arranged. One thing is sure, we would have to spend some money to make more money,” he said.

Knott-Craig said he has had serious interest in the company from potential buyers, but Cell C’s shareholders have been uninterested and would rather build a stronger company for a later sale.

“Job number one at Cell C is fixing the company, and the company needs a lot of fixing.”

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