Solving South Africa’s Telecom Industry’s Structural Issues

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JEREMY MAGGS: A warm welcome to FixSA. This is the Moneyweb podcast where we delve into the solutions for South Africa’s most pressing issues. Today, we’re zeroing in on the telecommunications industry and how it can tackle various structural challenges that are well-documented but continue to hold our nation back.

What am I referring to? It’s often the inadequate access to affordable data, inconsistent connectivity—especially in rural areas—and the consequent obstacles to education, entrepreneurship, and financial inclusion.

Joining me today is Jorge Mendes, CEO of Cell C, a pivotal player in South Africa’s telecom sector. Jorge, thank you for joining us. Welcome to FixSA! Let’s jump right in: what do you regard as the most significant challenge currently facing the telecommunications sector in our country?

JORGE MENDES: Thank you for having me, Jeremy. There are numerous challenges, but the one I hope is behind us is electricity, specifically load shedding. This has had a profound impact on our country and particularly on our industry.

I’m optimistic that we are moving on from that issue as substantial investments are being made into energy resilience, which is crucial to keeping communications operational. This doesn’t necessarily create revenue; it merely ensures that everything remains functional—billions have been invested in this. So I believe energy resilience has been our biggest hurdle.

Currently, the industry faces market saturation and low returns on capital expenditure, prompting a shift towards models like active sharing of infrastructure.

Having multiple base stations side by side, each with separate generators, batteries, and connections no longer makes economic sense.

Thus, I anticipate a significant increase in collaborative infrastructure sharing, and potentially some consolidation. In South Africa, this seems like the right direction to pursue. This would lower operation costs while allowing for enhanced infrastructure revenue and high-quality technology services, thus expanding 4G and 5G coverage to rural and underserved areas.

JEREMY MAGGS: Jorge, let’s delve into the challenges you highlighted. Starting with load shedding, I’m curious about how severe the impact was and what measures you’ve put in place to mitigate this risk and adapt operations.

JORGE MENDES: Indeed. Base stations require batteries that must sustain operations for a specific duration. If load shedding lasts beyond two hours, you need to recharge the batteries when power returns. Thus, we have had to enhance the number of batteries per base station. Major operators typically manage 14,000 to 15,000 base stations, each requiring several batteries.

Investment in batteries has been significant—easily in the R2-3 billion range annually over the last couple of years just to maintain operational communications.

JEREMY MAGGS: The other topic is infrastructure collaboration, which serves as a broader metaphor for the necessary fixes across South Africa. How have you successfully navigated this in philosophical, strategic, and practical terms?

JORGE MENDES: We have approached this pragmatically. At Cell C, we have faced serious challenges over the years. Launched 23 years ago, we were once a strong consumer champion, but we encountered difficulties that required recapitalization, with R44 billion written off and two major recapitalization efforts.

Read/listen:
Blue Label Telecoms seals Cell C restructuring deal
Transfer of Cell C mobile licence to Blue Label hits snags
Tech troubles: Can Cell C and MultiChoice survive?

We realized that building a high-quality network comparable to the leading operators would require around R35-40 billion in infrastructure to be competitive. Furthermore, we estimated needing about R10 billion annually to keep pace with the market.

Consequently, we struck deals with the top two players for a roaming arrangement to access their technology services. We maintain our core operations, billing systems, and spectrum, but our radio access network leverages MTN and Vodacom’s infrastructure to provide the coverage we need.

This setup allows us to gain world-class coverage while generating considerable revenue for our partners, who can reinvest in their infrastructure.

I believe this collaborative model may emerge as a global standard where competing market players in saturated environments opt for efficiency over redundant infrastructure.

JEREMY MAGGS: Jorge, let’s delve into the challenges you highlighted. Starting with load shedding, I’m curious about how severe the impact was and what measures you’ve put in place to mitigate this risk and adapt operations.

JORGE MENDES: Indeed. Base stations require batteries that must sustain operations for a specific duration. If load shedding lasts beyond two hours, you need to recharge the batteries when power returns. Thus, we have had to enhance the number of batteries per base station. Major operators typically manage 14,000 to 15,000 base stations, each requiring several batteries.

Investment in batteries has been significant—easily in the R2-3 billion range annually over the last couple of years just to maintain operational communications.

JEREMY MAGGS: The other topic is infrastructure collaboration, which serves as a broader metaphor for the necessary fixes across South Africa. How have you successfully navigated this in philosophical, strategic, and practical terms?

JORGE MENDES: We have approached this pragmatically. At Cell C, we have faced serious challenges over the years. Launched 23 years ago, we were once a strong consumer champion, but we encountered difficulties that required recapitalization, with R44 billion written off and two major recapitalization efforts.

Read/listen:
Blue Label Telecoms seals Cell C restructuring deal
Transfer of Cell C mobile licence to Blue Label hits snags
Tech troubles: Can Cell C and MultiChoice survive?

We realized that building a high-quality network comparable to the leading operators would require around R35-40 billion in infrastructure to be competitive. Furthermore, we estimated needing about R10 billion annually to keep pace with the market.

Consequently, we struck deals with the top two players for a roaming arrangement to access their technology services. We maintain our core operations, billing systems, and spectrum, but our radio access network leverages MTN and Vodacom’s infrastructure to provide the coverage we need.

This setup allows us to gain world-class coverage while generating considerable revenue for our partners, who can reinvest in their infrastructure.

I believe this collaborative model may emerge as a global standard where competing market players in saturated environments opt for efficiency over redundant infrastructure.

JEREMY MAGGS: Jorge, let’s delve into the challenges you highlighted. Starting with load shedding, I’m curious about how severe the impact was and what measures you’ve put in place to mitigate this risk and adapt operations.

JORGE MENDES: Indeed. Base stations require batteries that must sustain operations for a specific duration. If load shedding lasts beyond two hours, you need to recharge the batteries when power returns. Thus, we have had to enhance the number of batteries per base station. Major operators typically manage 14,000 to 15,000 base stations, each requiring several batteries.

Investment in batteries has been significant—easily in the R2-3 billion range annually over the last couple of years just to maintain operational communications.

JEREMY MAGGS: The other topic is infrastructure collaboration, which serves as a broader metaphor for the necessary fixes across South Africa. How have you successfully navigated this in philosophical, strategic, and practical terms?

JORGE MENDES: We have approached this pragmatically. At Cell C, we have faced serious challenges over the years. Launched 23 years ago, we were once a strong consumer champion, but we encountered difficulties that required recapitalization, with R44 billion written off and two major recapitalization efforts.

Read/listen:
Blue Label Telecoms seals Cell C restructuring deal
Transfer of Cell C mobile licence to Blue Label hits snags
Tech troubles: Can Cell C and MultiChoice survive?

We realized that building a high-quality network comparable to the leading operators would require around R35-40 billion in infrastructure to be competitive. Furthermore, we estimated needing about R10 billion annually to keep pace with the market.

Consequently, we struck deals with the top two players for a roaming arrangement to access their technology services. We maintain our core operations, billing systems, and spectrum, but our radio access network leverages MTN and Vodacom’s infrastructure to provide the coverage we need.

This setup allows us to gain world-class coverage while generating considerable revenue for our partners, who can reinvest in their infrastructure.

I believe this collaborative model may emerge as a global standard where competing market players in saturated environments opt for efficiency over redundant infrastructure.

JEREMY MAGGS: Jorge, let’s delve into the challenges you highlighted. Starting with load shedding, I’m curious about how severe the impact was and what measures you’ve put in place to mitigate this risk and adapt operations.

JORGE MENDES: Indeed. Base stations require batteries that must sustain operations for a specific duration. If load shedding lasts beyond two hours, you need to recharge the batteries when power returns. Thus, we have had to enhance the number of batteries per base station. Major operators typically manage 14,000 to 15,000 base stations, each requiring several batteries.

Investment in batteries has been significant—easily in the R2-3 billion range annually over the last couple of years just to maintain operational communications.

JEREMY MAGGS: The other topic is infrastructure collaboration, which serves as a broader metaphor for the necessary fixes across South Africa. How have you successfully navigated this in philosophical, strategic, and practical terms?

JORGE MENDES: We have approached this pragmatically. At Cell C, we have faced serious challenges over the years. Launched 23 years ago, we were once a strong consumer champion, but we encountered difficulties that required recapitalization, with R44 billion written off and two major recapitalization efforts.

Read/listen:
Blue Label Telecoms seals Cell C restructuring deal
Transfer of Cell C mobile licence to Blue Label hits snags
Tech troubles: Can Cell C and MultiChoice survive?

We realized that building a high-quality network comparable to the leading operators would require around R35-40 billion in infrastructure to be competitive. Furthermore, we estimated needing about R10 billion annually to keep pace with the market.

Consequently, we struck deals with the top two players for a roaming arrangement to access their technology services. We maintain our core operations, billing systems, and spectrum, but our radio access network leverages MTN and Vodacom’s infrastructure to provide the coverage we need.

This setup allows us to gain world-class coverage while generating considerable revenue for our partners, who can reinvest in their infrastructure.

I believe this collaborative model may emerge as a global standard where competing market players in saturated environments opt for efficiency over redundant infrastructure.

JEREMY MAGGS: Jorge, let’s delve into the challenges you highlighted. Starting with load shedding, I’m curious about how severe the impact was and what measures you’ve put in place to mitigate this risk and adapt operations.

JORGE MENDES: Indeed. Base stations require batteries that must sustain operations for a specific duration. If load shedding lasts beyond two hours, you need to recharge the batteries when power returns. Thus, we have had to enhance the number of batteries per base station. Major operators typically manage 14,000 to 15,000 base stations, each requiring several batteries.

Investment in batteries has been significant—easily in the R2-3 billion range annually over the last couple of years just to maintain operational communications.

JEREMY MAGGS: The other topic is infrastructure collaboration, which serves as a broader metaphor for the necessary fixes across South Africa. How have you successfully navigated this in philosophical, strategic, and practical terms?

JORGE MENDES: We have approached this pragmatically. At Cell C, we have faced serious challenges over the years. Launched 23 years ago, we were once a strong consumer champion, but we encountered difficulties that required recapitalization, with R44 billion written off and two major recapitalization efforts.

Read/listen:
Blue Label Telecoms seals Cell C restructuring deal
Transfer of Cell C mobile licence to Blue Label hits snags
Tech troubles: Can Cell C and MultiChoice survive?

We realized that building a high-quality network comparable to the leading operators would require around R35-40 billion in infrastructure to be competitive. Furthermore, we estimated needing about R10 billion annually to keep pace with the market.

Consequently, we struck deals with the top two players for a roaming arrangement to access their technology services. We maintain our core operations, billing systems, and spectrum, but our radio access network leverages MTN and Vodacom’s infrastructure to provide the coverage we need.

This setup allows us to gain world-class coverage while generating considerable revenue for our partners, who can reinvest in their infrastructure.

I believe this collaborative model may emerge as a global standard where competing market players in saturated environments opt for efficiency over redundant infrastructure.

JEREMY MAGGS: Jorge, let’s delve into the challenges you highlighted. Starting with load shedding, I’m curious about how severe the impact was and what measures you’ve put in place to mitigate this risk and adapt operations.

JORGE MENDES: Indeed. Base stations require batteries that must sustain operations for a specific duration. If load shedding lasts beyond two hours, you need to recharge the batteries when power returns. Thus, we have had to enhance the number of batteries per base station. Major operators typically manage 14,000 to 15,000 base stations, each requiring several batteries.

Investment in batteries has been significant—easily in the R2-3 billion range annually over the last couple of years just to maintain operational communications.

JEREMY MAGGS: The other topic is infrastructure collaboration, which serves as a broader metaphor for the necessary fixes across South Africa. How have