Should Cell C be so bullish?
[By Candice Jones]
The news that Cell C is signing a deal with international energy-drinks company Red Bull to bring a second virtual mobile network operator (MVNO) to SA may have struck some as peculiar and too ambitious.
Not only is Cell C courting Red Bull, it is understood to be building a platform that will support other virtual operators.
MVNOs are companies that piggyback off the infrastructure of network operators but interface directly with subscribers themselves.
But Cell C’s track record with MVNOs hasn’t exactly been a resounding success. Its first — and only — dance with an MVNO, was with Virgin Mobile, which entered the market in 2006 with great pomp and ceremony.
Cell C owns 50% of Virgin Mobile, although it is in the process of offloading this stake to handset distributor Allied Mobile.
When Virgin launched its mobile brand in 2006, there was a boom in MVNOs worldwide. In that year, Australia, for example, had more than 20 virtual operators. Belgium had over 30 and the US over 50.
At Virgin Mobile’s SA launch, Virgin chairman Richard Branson made bold statements about how the company would introduce “true competition” into the cellular market and grab 10% of the market.
Branson was hoping mobile number portability, introduced at about the same time as Virgin Mobile’s launch, would encourage customers to change operators because they could switch and keep their phone numbers.
But number portability has proved to be a bit of a flop and Branson’s hope of 10% market share was never realised.
Five years later and Virgin Mobile SA is finally making some inroads. It has signed up 300 000 subscribers and has enjoyed good growth over the past year. But it’s still tiny next to the big network operators.
So, why should Red Bull Mobile do any better? And what’s in it for Cell C?
Analysts say Red Bull will have to be smart about how it differentiates itself. It will either have to offer cheaper tariffs or add value in other ways.
BMI-TechKnowledge MD Denis Smit hits the nail on the head when he says it’s no longer good enough for MVNOs simply to offer voice minutes and megabytes at special prices. Rather, they have to give customers more stuff to do with these minutes and data.
Red Bull is not saying anything yet about its strategy and how it plans to tackle the SA market. What is clear is that it will play off its powerful brand, and — everyone agrees — the drinks company is a marketing machine.
I have spent hours watching the Red Bull’s famous Air Show, where stunt pilots fly a hair-raising course in tiny planes that any sane person wouldn’t put a foot inside. The company also sponsors the popular X-Games, where adventure sportsmen battle it out for the craziest stunts on skateboards, BMXs and on climbing walls.
Red Bull holds hundreds of events in SA each year, and often brings out high-profile deejays.
And perhaps it’s making its play in mobile at the right time. As Smit points out, the rise of smart devices — both smartphones and tablet computers — could prove the ideal way for a company like Red Bull to make a mobile service work in SA.
Consumers are crazy for devices like the Apple iPhone 4, Samsung’s Galaxy S and Galaxy Tab, and the Apple iPad, even though it’s not available through official channels yet.
Add to that heated competition in the mobile space and the continually falling price of data and voice services, and the mobile phone becomes a very effective marketing tool.
It’s a different ballgame than it was in 2006 when Virgin came to SA.
But will fun adventure videos and “beatbox” ringtones bring apathetic South Africans around to the new service?
I believe it will, but it needs to do something more impressive than simply offer Red Bull-based content to potential subscribers.
What it needs to do is bring exclusive applications to the most popular handsets and mobile operating systems. It also needs to bring all its marketing muscle to bear and, to borrow a phrase, give its brand wings across as many media outlets as possible.
Offering tariff discounts wouldn’t do any harm either.
Cell C will also need to be smart. If it can continue the clever marketing momentum it kick-started last year to such great effect, and leverage this effectively into partner brands, it should prove beneficial all round.