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Data providers in bruising rat race

by Africa Moyo
09 Apr 2017 at 08:12hrs | Views
AS mobile broadband service providers compete for the hearts and wallets of local consumers, a bruising rat race is gradually developing in the sector, raising hope prices might decline to reasonable levels by regional standards.

While ZOL Zimbabwe, a unit of Liquid Telecom, is locked in a race with State-owned TelOne, mobile telecommunication companies — Econet Wireless Zimbabwe, NetOne and Telecel — are equally involved in broadband wars of their own.

Last week, ZOL seemed to subtly poke TelOne in an advert in which it claimed "#FibroniksFast leaves adsl in the dust", an apparent reference to the Asymmetrical Digital Subsriber Line that is mainly offered by its rival.

And the Government-owned firm is clearly angling for the data market, especially in an environment where revenues from voice continues to decline.

Industry regulator Postal Telecommunications Regulatory Authority (Potraz) reported in its fourth quarter report for 2016 that national voice traffic had dropped 8,6 percent to 845 million minutes from 923 million minutes in the same period in 2015.

Ominously, TelOne's voice revenue has declined 43 percent between 2013 and 2016.

It is, thus, targeting to increase broadband services' contribution to total revenue to 48 percent by 2020 from the current 20 percent.

As the scrum for the local market continues, prices have, as a result, been trekking southwards. However, price adjustments seem to be informed by consumer resistance to high data prices.

The country's internet penetration rate during the quarter to December 2016 fell 0,1 percent to 50 percent from 50,1 percent recorded a year earlier, Potraz say.

In order to pre-empt the possible impact that declining prices might have on revenues in the sector, the industry regulator — which levies 1,5 percent to operators as a contribution to the Universal Services Fund — pegged floor prices for data at US2c per megabyte (MB) from January 9, 2016. But this has not dissuaded operators from playing the price card.

The minimum TelOne individual package on ADSL Home has since been reviewed from US$25 for 15 gigabytes (GB) to 30GB for the same amount, while ZOL's Fibroniks Lite is capped at US$29 per month for 25GB.

ZOL Zimbabwe, through its parent company Liquid Telecom, has arguably a much bigger fibre optic footprint than TelOne.

Itself a subsidiary of Econet Global, Liquid Telecom is presently on track to achieve the elusive "Cecil John Rhodes" dream of an infrastructure backbone that spans from Cape to Cairo, literally.

But TelOne, in addition to have a ubiquitous infrastructure — albeit old, leverages on its relationship with fellow State-owned enterprises and other quasi-Government units such as Powertel.

It is also currently drawing down on a US$98 million loan from China's Eximbank for its national broadband project. About US$33 million has been spent so far.

Mobile telcos

The tussle is also the same for operators providing mobile broadband services.

While the firms used to traditionally compete on voice and SMS (Short Messaging Services) platform, over-the-top disruptive technologies such as WhatsApp Messenger, Twitter and Facebook — which have seriously affected old sources of revenues — have made broadband the new frontier.

Currently, operators are charging data tariffs ranging from US2,5c per MB to US4,3c per MB.

Econet Wireless Zimbabwe (EWZ), the biggest company by revenues and subscribers, claims it has invested more than US$1,2 billion on its infrastructure — most of it on its data services — in the 14 years through 2013, and it has managed to back this up with quality services, though consumers have been complaining about "extortionate" billing.

Of the 758 LTE-capable base stations in the market, Econet has 497, 236 more than NetOne.

But NetOne, which is currently buoyed by a US$218 million facility from China, commissioned 111 more LTE e-Node Bs ( LTE infrastructure equipment) in the three months ended December 2016.

Its OneFusion package, a service that combines traditional voice and SMEs with new social media and messaging services, has, however, redefined the market, helping the network add more subscribers.

The minimum package that sells for US$5 provides 50 minutes on-net calls and 18 minutes to other network.

It also comes with a 300MB data bundle, including 700MB for WhatsApp, 900MB for Facebook and 10 SMS.

Of late Telecel seems to have successfully cloned the service through its MegaBoost pack, which gives 50MB for internet service, 15 minutes Telecel-to-Telecel voice, four minutes to other networks and 15 text messages.

It is only valid for a day.

NetOne's public relations manager Mr John Nyashanu said last week the company is consolidating its "broadband infrastructure countrywide".

"This project runs into several millions of dollars. We are confident that the current data services and excellent

customer experience will be maintained and enhanced during the roll-out programme.

"NetOne takes the lead in bringing data tariffs down because we believe it's the future. We are lagging behind as a country in terms of commoditising data. We will continue to offer data promotions sustainably.

"Our focus is on optimising our cost structure and extend the benefit of this exercise to the consumers. If we compare data tariffs in Zimbabwe to the rest of the world you will find that, as a country we are still expensive," said Mr Nyashanu.

In Mozambique, Movitel — the largest mobile operator with four million subscribers (38 percent market share) — charges US60c for 360MB valid for a day.

South Africa's Cell-C charges US$1,08c for 100MB valid for a month.

But there is no room for snoozing.

Experts say Econet has the capacity to bounce back, especially after it successfully repays the US$128 million debt it owes to creditors.

It is believed that by servicing the obligations, Econet had been encumbered to such an extent that it could not effectively compete on pricing.

Econet said last week it has "an ongoing investment programme to expand and strengthen its network, including broadband in response to growing demand for data and related services".

"The investment demonstrates our commitment to invest in platforms and technology that delivers value, convenience, access and choice to customers is an ongoing activity.

"We hope to provide relevant updates when the company releases its year-end results as soon as these are available."

Mr Soul Kabweza, editor of local technology blog, TechZim, told The Sunday Mail Business that competition in data pricing is a positive development for consumers in particular, and the economy in general, as long as it is "still healthy for the businesses competing".

He said cheaper data translates to increased access to communication, which has been described as a basic need by the International Telecommunications Union (ITU).

"Increased connectedness is also a positive thing for entrepreneurs and businesses because the internet is a powerful tool for innovation.

"Indeed, it is possible for internet companies to charge unsustainably low prices. This is why the regulator should ensure that any price war is not left unchecked.

"That said, it is possible for operators with deep pockets to choose to make losses for a certain period in order to price their competition out of business," said Mr Kabweza.

However, he said it was important for Potraz to know what a sustainable data price could be so that any price war does not go below the floor price.



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