Zimbabwe - Mobile operators are expending their services with the dollarisation of services

[zimbabwe independent] ZIMBABWE'S mobile phone operators have rolled up their sleeves to tap into the lucrative market rejuvenated by the dollarsation of the economy and an increasing appetite for new technology among locals.

As far back as April last year, Telecel Zimbabwe, then the smallest operator after Econet and NetOne, promised its customers that the company is going "forward with confidence and renewed hope for the future" in an advertisement titled: "Do you remember?"

Telecel continued in the advert: "During the challenging times, we kept you roaming, and our contract customers remained unaffected without switching packages or being forced to pay something upfront. We believe this is what makes for our valued relationship -- in good or bad times."

The statement seemed to be aimed at Econet, who switched contract subscribers to the pre-paid platform at the height of Zimbabwe's economic crisis. Econet management had made a decision in November 2008 to migrate contract customers to the pre-paid platform because the mobile operator could not invest in a new billing system at the expense of other key components of the network.

A year later, Telecel has doubled its subscriber base to more than a million to become the second largest operator in the country. Econet, on the other hand, has added millions more to its network.

At a function to celebrate Telecel Zimbabwe's signing on a million subscribers, managing director Aimable Mpore had a few words for his competitors; a revolution in the telecommunications sector has just begun.

He took his audience back to the past where subscribers paid US$15 for starter packs, comparing it to today's situation where the same mobile phone chip costs US$2. When he joined Telecel, Mpore says he was "shocked" by the high costs.

He says when Telecel initially reduced the price of sim cards to US$5, competitors thought it was just a promotion and ignored it but the response from the market was "overwhelming" that Telecel decided to lower the price even further. But Mpore is proposing an even lower price. In fact, he says Telecel may one day give away starter packs and sell a handset.

"By the end of next year, Telecel would have signed on an additional 1,5 million subscribers," he says. But the company's focus is no longer on voice and text services as they are investing in 3G technology. Management hopes the service will be up and running inside the third quarter of this year. The company is in the process of getting a submarine link, which will change the face of internet for customers.

"When we launch 3G in August, it will be working perfectly and will change connectivity as you know it," Mpore says.

Only Econet and Powertel Wireless offer the service but Telecel is winning on other fronts. Calls to international destinations cost 25 cents, the equivalent of a local call.

There is also a sweetener for Telecel subscribers. A mega juice card that came on the market last month is also playing in favour of the second largest player.

Under the mega promotion, airtime worth a dollar carries an additional US$2 worth of airtime. But there is a catch; it has to be used inside two days. This is aimed at stimulating calls.

Econet is, however, not taking punches face-down. The operator is running discounted calls from 10pm to 6am. Instead of paying 23 cents for a call from the stipulated time, subscribers on the network pay only 12 cents including value added tax. This is also intended to stimulate the volume of calls. To counter Telecel on the international market, Econet is offering bonus airtime for every international call beyond two minutes.

Econet and Telecel are also digging up trenches towards Beira, Mozambique for the installation of optic fibre links.

This is the first step towards setting up subsmarine link. Although Telecel might be comfortable with sharing facilities with Econet, the latter will not be willing. Econet's argument will be simple one; Econet has spent too much on capital expenditure and there is no legislative instrument compelling it to do so.

According to Econet's financial statements, the group spent over US$160 million on network upgrades and expansion in the year to February and will spend an additional $300 million this year. Part of the capital came through loans.

By the end of June last year, Econet had spent over US$100 million on base stations and other equipment. Over 200 new base stations were installed, and this deployment resulted in a massive 200% growth in coverage.

Econet is not stopping there. The company has stepped up its expansion drive through the proposed installment of 90 base stations in 90 days. By Wednesday, the group had covered close to a third of the groundwork and seems to be sticking to its deadline.

While much has been made of Econet's profit, the company's Capex to EBITDA margin of 89%, and its high debt-to-equity ratio show that, in fact, most of the money is going back to building the network.

Against such a background, Telecel will have to part with money to grow coverage on the back of funding from Orascom. Mpore says his company has already installed base stations in 16 rural areas and plans to install nine more in remote areas in a bid to widen network coverage in the country.

While battle lines seem to have been drawn between Econet and Telecel -- once at the tail-end in terms of subscriber base and market perception -- government-owned mobile phone company, NetOne, continues to be handicapped by lack of funding.

Apart from promotions -- electronic entry of the lotto jackpot, weather update and other services -- NetOne brags of pioneering the "call me back" service.

The "call me back" is a free sms service where a subscriber on the same network can request the operator to relay a call me back message to another NetOne subscriber.

Businessdigest understands that the company is caught between bureaucratic forces. On one hand, government officials are pushing for a new investor to help NetOne wade the waters while treasury is understood to be resisting the move arguing that the company should go public through an initial public offer on the Zimbabwe Stock Exchange.

Zimbabwe: Mobile Phone Operators Face Off