Picture: 123RF/citadelle
Picture: 123RF/citadelle

5G is an inevitability, but unless we as an industry make dramatic changes to the traditional models of network rollout it is unlikely that it will make the impact we are hoping for.  

Taking the reins of Cell C more than two years ago, the focus was on rightsizing and optimising the business for its future sustainability. The vision was for Cell C to become a successful business run on sound operational principles and focused on creating customer value.

To achieve this vision and similar to other global mobile telecommunications players, Cell C faced a crossroads: our industry requires continuous investment in costly infrastructure, which offers diminishing returns for operators. The capital investment in LTE and LTE-Advanced will be small in comparison with the investments required to cover the same footprint with 5G technology.  

In its research report “The Evolving Telecoms Value Chain”, Africa Analysis forecasts that in SA the 5G population network coverage would reach 60% by 2030. To achieve this coverage a single mobile operator would need to deploy 18,000 5G base stations (2.5GHz). 

Using a historical average capex per base station of R2m-R64m, five mobile operators and the wireless open access network would need a cumulative capex investment of R285bn. (The average for MTN and Vodacom shows that a single mobile operator would need to invest R47.5bn.)  

The report also makes the point that there is a disconnect between revenue and capex. Digital services companies create and will continue to create the demand for digital services. However, it is the network operators that need to enable the delivery of these services. 

This shift from a network-based to a service-based consumption and billing world has led and will continue to lead to a disconnect between network operator revenue and capex. This disconnect will grow larger as the digital services demand grows, because intuitively the revenue of today for telecoms providers is going to be the cost of sale of tomorrow. 

I strongly believe there needs to be an evolution of the “network” and infrastructure-based competition if telecoms providers are going to give customers a 5G service at an affordable price. By removing the burden of individual infrastructure investment by each provider and allowing the megabyte and the minute to become the tools of provision rather than the product, providers are more likely to find value and still give customers what they want.   

However, this requires a big change in the mindset of telecoms providers, particularly those that believe infrastructure investment is the differentiator. My view is that network infrastructure isn’t a differentiator for customers; what they want is the exceptional services that the infrastructure makes possible. Cell C’s future relationship with our customers will rest on the pillars of innovation in service provision.

Customers want ease of use — for example, a bundled deal that includes home automation, security provision and tracking services where data is just the channel. Alone, data is a grudge purchase. It has little value other than to give customers access to the services they want. By turning data or voice into value-added services that customers use every day, providers can regain consumers’ trust. Mature markets internationally have allowed for the cross-utilisation of active networks to enhance economic efficiency of their capital expenditure — capacity is more fully used in comparison. 

If our strategy were to play catch-up to Vodacom and MTN networks we would have to invest R1.5bn a year for 18 years based on the assumption that we would be able to build 400 new cellular sites per year, and assuming competitors did not build new towers. This investment in network infrastructure would be impossible to maintain.  

Based on technology advances it is possible for network operators to avoid duplication in radio access network infrastructure. Cell C is pioneering this approach in SA by becoming a wholesale buyer and aggregator of network capacity. While for us the strategy may have been born out of the need to survive, by doing so we can offer a quality network equivalent to our bigger competitors.

The network model Cell C is pursuing will significantly reduce network expenses along with the need for capital expenditure, allowing the company to be profitable, accessing best-in-class infrastructure, benefiting from scale and being able to pass on value to customers. We will continue to use our own spectrum and manage the customer experience. We plan to leverage our telco platform to innovate on products and services and improve digital inclusion.

As network providers the value we create must be based on what customers want and their expected needs of tomorrow, instead of what we as an industry are offering today.  

• Craigie Stevenson is Cell C CEO.

subscribe

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.