Alan Knott-Craig promised to shake up the cellphone industry when he joined Cell C last month and he has not disappointed - he cut prepaid call tariffs by more than 34% yesterday, bringing them lower than contract call rates for the first time in 18 years.
Cell C introduced a new prepaid package with prices reduced by 34% to an all-day rate of 99c a minute, with per-second billing from the first second. This applies to voice calls from Cell C to any network. Existing customers can migrate to the new package.
Vodacom quickly followed suit, yesterday announcing its new prepaid package of 99c a minute to any network.
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Mr Knott-Craig called on the Independent Communications Authority of SA (Icasa) to slash mobile termination rates to 25c a minute to stimulate competition.
Analysts said the price cuts were long overdue given that mobile termination rates - tariffs network operators pay to carry each other’s calls - have been declining since 2010, but consumers largely paid the same price. Peak termination rates are 56c a minute and will drop to 40c next year.
Mr Knott-Craig said operators would still make healthy profits with the 25c rate. "To Icasa I say: ‘Drop mobile termination rates even further, provide Cell C with asymmetrical termination rates to help us achieve the scaleability we need to compete even more fiercely with the large incumbents, and we will surprise you and them with our response. Help us to help the consumer’," he said.
Arthur Goldstuck, MD of World Wide Worx, said while prepaid customers were the poorest, they paid the most for cellphone calls. "That was always morally indefensible. In a way, Alan Knott-Craig is redressing an ill that he helped create."
Mr Knott-Craig was CEO of Vodacom for 15 years.
Mr Goldstuck said that Cell C’s offer beat Vodacom’s. Per-minute billing worked out more expensive than per-second billing on the same rate, as callers seldom used up full minutes, he said.
Spiwe Chireka, an analyst at global research firm IDC, said the new, 99c flat rate provided transparency and simplified Cell C’s pricing structure.