'Mobile phone networks are not cash cows'

The GSMA has said that some mobile operators are struggling. (Duncan Alfreds, Fin24)
The GSMA has said that some mobile operators are struggling. (Duncan Alfreds, Fin24)

Cape Town - All mobile operators are not huge financial cash machines, especially where multiple players vie for market share in one country, says an international organisation.

"I think if you look inside the companies on a daily basis, there are a lot of challenges and there are a lot of markets where you have some unsustainable situations where licences have been given to many players and you have six, seven eight different players," Anne Bouverot, director general of the GSMA told Fin24.

From a South African mobile network perspective, MTN said that struggling operators negatively affect the entire industry.

"The industry gets affected from a sustainability point of view in that those aren't making money will start doing certain things that are probably not in the interest of the industry," MTN Group President Sifiso Dabengwa told Fin24.

"What we've seen for example is very aggressive pricing, and what then happens is they stop investing, customers get poor service, but then the whole industry gets a negative perception," he added.

Competition

The likes of Cell C has had an aggressive pricing policy since former Vodacom CEO Alan Knott-Craig was installed as chief executive, and the danger in dropping prices too quickly means risks leaving less revenue for expansion of the network.

More recently, Cell C has been involved in a public spat with customer George Prokas who erected a banner in Johannesburg that cast the operator as a "useless" network provider.

"We think that allowing such companies - leaving them to fail - the regulator should allow them to team with others so that they become bigger and survive or allow them to be acquired so that it's not a question of a company failing completely," Dabengwa said.


MTN Group President Sifiso Dabengwa has said that struggling mobile operators should be allowed to fail. (Duncan Alfreds, Fin24)

But that doesn't mean that there should be less competition, Bouverot argued.

"We should definitely keep competition, I mean we're not at all suggesting that we go back to the old days of the PTT and the one company owning all the services."

The GSMA's Mobile Economy Sub-Saharan Africa 2014 report found that mobile operators alone contribute $27bn or 1.9% of the region's GDP, and a further $8bn in related industries.

"The activity generated by the both the mobile operators and the ecosystem also has a knock-on effect on the rest of the economy including further economic activity valued at $7bn (0.5% of GDP)," says the report.

Network investment

But all operators are not equal in terms of the cash they are able to generate.

"I wouldn't qualify all of them as big powerful successful companies. Some of them are really struggling; some of them are losing money and you result in a situation where the first thing they do if they're not making money is to stop the investment," said Bouverot.

"It's about the balance between competition and the ability to invest into future networks."

Watch Sifiso Dabengwa explain why struggling operators should be allowed to fail in this online video.



- Follow Duncan on Twitter

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