Econet to terminate calls to and from NetOne

Enhanced Communication Networks (Econet)  advised that it will terminate all interconnect services with NetOne with effect from today, Thursday 23 August 2012. As a result no calls will be possible originating from NetOne and terminating directly onto Econet as well as calls originating on Econet and terminating directly onto NetOne.

The decision has been taken after NetOne repudiated the interconnection agreement. Since dollarization, NetOne has failed to remit interconnection fees. Econet says it is owed approximately US$ 20.4m (excluding interest) as at 31 July 2012. Econet states that it shall remain ready to reconnect NetOne if NetOne commits to the terms of the existing interconnection agreement, makes a substantial payment towards the historical debt, and commits to meet future obligations on due dates.

Analysts do not expect the termination of the interconnect agreement to have a substantial impact on Econet's revenues and profitability. The interconnect rates are 7 US cents per minute for a domestic call and 20 US cents per minute for international calls.

Econet is the dominant telephone company with a subscriber base of over 6.4m commanding a market share in excess of 70%. Given the higher subscriber base, the company's incoming MoU are significantly higher than outgoing with on net Econet traffic comprising approximately 80% of total. We note that the non-payment of interconnect fees has negatively impacted on Econet's cash flows and Econet is owned in excess of US$ 85.0m by the other operators.

We have contacted NetOne for comment and they are yet to get back to us. If Econet goes through with this, it will result in untold problems for the state owned operator. For starters, subscribers, together with the most loyal ones, are bound to migrate to other mobile networks en masse.

According to the subscriber stats released by POTRAZ for the second quarter of 2012, NetOne has only 1.6 million subscribers.