Gloves off in Vodacom's battle with Cell C

"We will react to competition and we will beat the competition," Joosub declared at a media roundtable this week, in response to a question about whether Vodacom's soon-to-be-introduced 89c/minute international calling promotion was in response to Cell C's aggressive move to cut its international tariffs to 99c.

With that annoucement, Joosub threw down the gauntlet to Knott-Craig.

In many respects, Joosub is Knott-Craig's protégé. But Joosub is also his own man, one whose business acumen is revered by industry rivals.

So, the scene is set for a contest between two former colleagues and two of South Africa's shrewdest businessmen.

On one side is Knott-Craig, who wants - no, needs - to grow Cell C's market share, something he can only do by convincing consumers to shift their loyalties. That's never an easy task, given South Africans' complacency.

If he's successful, Vodacom will be the biggest loser by virtue of the fact that it is the country's largest mobile operator, with 50% market share.

Knott-Craig has shown he's not afraid to slash prices and to take a knife to the product complexity so loved by his competitors. Frankly, he may have no other choice if he's going to get anywhere near his objective of doubling Cell C's market share to 25%.

On the other side is Joosub, whose job is to retain Vodacom's market share while ensuring the group's profit margins are kept aloft. That was easier when the market was essentially a duopoly between Vodacom and MTN, and Cell C showed little interest in competing on price, especially for voice calls. There was an unwritten rule among the operators: don't go nuclear on prices.

Now Knott-Craig has done exactly that, firing off a few tactical nukes in the direction of MTN and Vodacom.

MTN has barely reacted, simply issuing statements saying its prices are already the lowest in the market - impossible to prove or disprove because of the sheer complexity of its tariffs.

But Vodacom has reacted and continues to do so - not always well. In May, when Cell C made its first big move by cutting prepaid tariffs to 99c/minute, Vodacom countered quickly, introducing a similar product called Freedom 99.

Except it rushed the new product to market so quickly in a ham-fisted attempt to beat its smaller rival that it neglected to follow the correct regulatory processes and was forced into an embarrassing about-turn. It had to pull full-page advertisements from the Sunday newspapers.

Since then, the operator appears to have quietly ditched Freedom 99.

Joosub will want to avoid repeats of such incidents. However, the operator's reaction to Cell C's 99c/minute international calling plan has already run into trouble, though apparently not of the scale of the Freedom 99 debacle.

Just hours after announcing that the new tariffs would take effect on October 1, it was forced to delay their introduction indefinitely because of what a spokesman called "minor technical issues experienced in the final round of testing".

At last week's media roundtable, Joosub said his old boss had "his work cut out" running Cell C. There is no doubt Vodacom is in a much stronger position than Cell C. But as the battle for market share intensifies, as the nukes start raining down, it's fair to say Joosub has a challenge on his hands, too.

Source: Financial Mail via I-NET Bridge