The Blue Label Telecoms Circular (18/10/2016) shows that Cell C subscriber numbers are significantly lower when reported against the industry standard of a 90 day active subscriber definition. Using this new information and applying the 90 day definition to the historically published subscriber numbers shows that Cell C has not performed as well as it has claimed. Over the last five years, the mobile operator’s SIM market share has hovered around the 15% mark. This despite the various subscriber acquisition strategies undertaken by it.
Subscriber Reporting Overview
Mobile operators have settled on a 90-day revenue-generating subscriber definition for reporting active mobile subscriber numbers. The 90-day says that a subscriber is defined as active, if on that SIM there is a revenue generating event over a continuous 90-day window. The 120-day definition extends the 90-day window to 120 days. Cell C has reported their subscribers on a 120-day definition, whereas the rest of the mobile operators have reported their subscribers against a 90-day definition.
The 90-day is defined as the 90RGS subscriber, while the 120-day is defined as the 120RGS subscriber.
Why is reporting subscriber numbers against a common definition important?
The analysis of the market and individual operator performances relies upon using subscriber numbers reported against a standard definition (or as close to a such a definition as possible). For example, the reported subscriber numbers are one of the KPI’s used to assess the market and individual operator performance over time. The analysis, however, requires that the information used is based on a standard definition. When an operator does not adhere to this principle, then that KPI analysis can lead to the wrong assessment of that operator’s performance, and can provide the wrong view about the market dynamics.
Cell C Historical Subscriber Reporting
Historically, there was always a suspicion that Cell C reported their subscriber numbers on a 120RGS basis while the rest of the mobile operators used the 90RGS definition. In the Blue Label Telecoms Circular (BLT-Circular), Cell C was reported to have over 25 million subscribers (page 11). However, on page 14 of the BLT-Circular, Cell C was reported to have 12.7 million subscribers. This large difference in subscriber numbers triggered an investigation into these numbers. It emerged that the 25 million was based on a 120RGS definition, whereas the 12.7 million was based on the 90RGS definition.
Cell C is not the only operator to have used a different subscriber definition.
From 2005 to 2012, Vodacom reported its prepaid subscriber base on a 210-day RGS. This was changed to a 90RGS in March 2012. The percentage difference between the 90RGS and 210RGS increased from around 9.6% (March 2005) to 21% by March 2012.
It was expected that Cell C would have a similar overstate factor when comparing the 90RGS and 120RGS subscriber bases. The information revealed in the BLT-Circular showed that there is a large difference between the two sets of Cell C subscriber numbers (90RGS vs 120RGS).
Reviewing Cell C Historical Subscriber Numbers
The large difference in the 90RGS and 120RGS subscribers required a comprehensive review and reassessment of Cell C’s historical subscriber numbers. Given that Cell C has not declared its historical numbers against the 90RGS definition, we needed to revisit all of the previously published Cell C subscriber numbers, in order to better understand the operator’s performance.
We analysed the published numbers and drew out the following observations:
- The large overstatement of Cell C subscribers is found in their reported prepaid subscriber base:
- At June 2016, the 120RGS subscriber base is overstated by 115%, when the base is compared against a 90RGS subscriber definition.
- Analysing the reported Cell C numbers shows that the impact of the overstatement becomes more apparent from March 2012 onward. Based on a 90RGS definition, the Cell C subscriber numbers were overstated by around 80%. This is similar to our estimate of Cell C’s churn over this period.
- The postpaid base (postpaid+hybrid) reported subscriber numbers are consistent with historically reported numbers:
- Therefore, we conclude that there is most likely a very small overstatement of the postpaid base.
SA Network SIM Market Share
The challenge in undertaking a historical correction of the published Cell C subscriber numbers, is deciding on the correction factor to align the 120RGS subscriber base to the 90RGS subscriber base. The following chart shows the network SIM market share trend over the past five years.
Source: SA Telecoms Model, Sep 2016
Cell C has remained at around 15% market share. It has not achieved the subscriber growth that it has claimed, and the actual subscriber numbers now indicate that Cell C has not grown its market share as previously thought. The new data throws doubt on the success of Cell C’s strategy to grow its subscriber base.
What the chart does show is that Telkom Mobile is the only operator to have consistently grown its market share of SIMS.
- Analysis of the newly revealed Cell C subscriber numbers, shows that Cell C’s 90-day defined subscriber base (for June 2016) is only 12.7 million and not the 25 million that it had communicated to the market. This is an overstatement by 95%.
- Using the 25 million, 120-day definition, has enabled Cell C to claim that it has performed remarkably well over the past few years. Our view is that Cell C has used these subscriber numbers to validate its strategy.
- However, the operator had not reported its subscriber base against the industry standard of 90RGS. Correcting the historical subscriber numbers to a 90RGS definition shows that Cell C has not been successful. Over the past five years, its SIM market share has remained at round 15%.
- The significantly overstated Cell C subscriber numbers have hidden from the market the true challenges that Cell C has faced. The 90RGS numbers indicate that Cell C’s strategy has not been as successful as the operator would have the market believe.
- What the overstatement has done, is to hide and obscure insight into the real winner in the market in terms of subscriber market share growth – namely, Telkom Mobile. Over the past five years, Telkom Mobile has been the only mobile operator to have grown its subscriber base, albeit off a low base.
This analyst note drew upon the information published in the Blue Label Telecoms Circular issued on 19 October 2016. This information was used to guide the rebasing of the historical subscriber numbers published by Cell C, to a 90-day subscriber definition (90RGS).