Mobile tariffs war looms in Zimbabwe

Econet Wireless, Zimbabwe's largest telecomunications company, last week on Friday slashed the cost of calls to other networks by a massive 60 percent, saying it is the "deepest tariff cut ever introduced on the market" with mobile analysts predicting a vicious dogfight in the telecoms industry.

Econet said the new tariff was "unconditional" and would be "effective immediately on all packages and at all times of the day."

In a statement, Econet Wireless chief executive officer Mr Douglas Mboweni said all Econet customers would now also enjoy Buddie Zone tariffs with discounts of up to 90 percent.

"Econet will mount an extensive campaign to show that it not only has the cheapest tariffs but it also has the best value for money. Our tariffs are unconditional and we do not ask you to buy something extra or spend so much to get something.

When we give, we give. We are not the largest operator by accident. Our customers know that the value that we give them in terms of coverage, network quality, services, products and tariffs cannot be matched."

Last week, telecommunications regulator, Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz), had to intervene after a stand-off between Econet and Telecel turned nasty when the latter was allegedly delaying to restore connectivity to Telecel subscribers.

Local consultants MMC Capital noted that price wars between the two competing mobile operators had culminated in the stand-off as Econet felt the heat.

Unlike Telecel, which has a lower gearing ratio and idle capacity, Econet is heavily borrowed, especially after it secured a syndicated loan of more than $300 million in 2012.

Experts opine that this makes it tough for Econet to compete on the price front.

"Telecel has of late been on a subscriber acquisition spree at whatever cost and chief among its strategies has been granting of bonus credits for both voice and data, a situation in which a US$1 purchase of voice credits also comes with data bundles worth the same amount.

"Econet, no doubt, was losing subscribers and multi-simming re-emerged to the detriment of Econet's revenues," said MMC Capital in a recent research note.

MMC Capital said Telecel had idle capacity and could easily take up additional subscribers without compromising its service delivery.

"Telecel has the ability to take on traffic without many challenges hence the mobile operator's move to take Econet subscribers and, of course, revenues," said MMC Capital.

Although some argue that warring on the pricing front is detrimental to the business, there are quarters who believe that price discounts will help the generality of subscribers, most of whom do not have access to smartphones and the Internet to make voice calls.

Unofficial estimates put the rate of smartphone penetration at between 11 percent and 20 percent, while Internet penetration is below 35 percent

It is believed that the Efficient Rate Per Minute (ERPM), which is a measure of the cost of voice calls, in Zimbabwe is around 20 cents, which is punitive to the average subscriber.

However, some mobile operators are not comfortable with reducing it as this would eat into their revenues and profits.

Amid the vicious dogfight in the telecommunications sector, subscribers will be the ultimate victors as they now continue to benefit from the promotions that are continuing to shake the market.