Cell C Offers a Free Device to Entice New Users and Increase Data Revenues
As a special three-month promotion, South African provider Cell C has launched a set of five contract packages that offer customers a new device every year for the duration of the contract (one to four years). In addition, the packages feature reduced prices on data and text messages and a flat 0.99 rand-per-minute call rate. Customers may opt out of the plan at any time. The promotion runs from 17 August to 17 November.
Tarifica’s analysts, who continuously track over 200 operators in 76 countries for our mobile database, observe that competition in emerging market countries is typically intense. The South African mobile marketplace, with over 100% penetration, is particularly competitive with five major players, of which we consider Cell C to be in the second tier.
Its current promotion appears to us to be an innovative and aggressive strategy, not uncommon for a second tier player in an ultra competitive market. For one thing, the offer of a free device every year without having to make a long term commitment is undeniably attractive and will likely result in new business for the company. But more important, we like the way the data component has been priced. For example, the new plans that offer high-end devices include just 100 rand’s worth of data per month. At 0.25 rand per MB, that translates into an allowance of only 400 MB per month, which in our view is quite low for active users. It will be even less if the user also makes voice calls over the network. Our expectation, then, and we imagine Cell C’s as well, is that consumers enticed by the free devices will likely end up going over the data limit, producing sufficient extra income to more than make up for the cost of giving away new devices every year.