Is Econet fighting a good fight at the wrong time!

Every decision counts. Good ones lead to success while bad ones are costly. But how are good decisions made? What separates a good decision from a bad one? What I know is that both good and bad decisions have opportunity costs while some have unintended consequences. Simply stated, an opportunity cost is the cost of a missed opportunity. It is the opposite of the benefit that would have been gained had an action, not taken, been taken, or vice versa. Unintended consequences, according to Wikipedia, are outcomes that are not the ones intended by a purposeful action.

Applied to a business decision, the opportunity cost might refer to the profit a company could have earned from its capital if it had used its assets differently. The concept of opportunity cost may be applied to many different situations. It should be considered whenever circumstances are such that scarcity necessitates the election of one option over another. Opportunity cost is usually defined in terms of money, but it may also be considered in terms of time, person-hours.
 
Reality is that opportunity costs increase the cost of doing business and thus should be recovered, whenever possible, as a portion of the overhead expense charged to every job.

When researching about opportunity cost in decision making, this writer came across a story about William Orton, president of the Western Union Telegraph Company (WUTC). In 1876, Western Union had a monopoly on the telegraph, the world's most advanced communications technology then. This made it one of America's richest and most powerful companies, "with $41 million in capital and the pocketbooks of the financial world behind it." So when Gardiner Greene Hubbard, a wealthy Bostonian, approached Orton with an offer to sell the patent for a new invention Hubbard had helped to fund, Orton treated it as a joke. Hubbard was asking for $100 000! Orton bypassed Hubbard and drafted a response directly to the inventor.

"Mr. Bell," he wrote, "after careful consideration of your invention, while it is a very interesting novelty, we have come to the conclusion that it has no commercial possibilities... What use could this company make of an electrical toy?"

The invention - the telephone - would have been perfect for Western Union. The company had a nationwide network of telegraph wires in place, and the inventor, 29-year-old Alexander Graham Bell, had shown that his telephone worked quite well on telegraph lines. All the company had to do was hook telephones up to its existing lines and it would have had the world's first nationwide telephone network in a matter of months. Instead, Bell kept the patent and in a few decades his telephone company, "renamed American Telephone and Telegraph (AT&T), had become the largest corporation in America ... The Bell patent - offered to Orton for a measly $100 000 - became the single most valuable patent in history!"

Ironically, less than two years after turning Bell down, Orton realized the magnitude of his mistake and spent millions of dollars challenging Bell's patents while attempting to build his own telephone network (which he was ultimately forced to hand over to Bell.) Instead of going down in history as one of the architects of the telephone age, he is instead remembered for having made one of the worst decisions in American business history!

Orton is of course not the only corporate decision maker to have made a costly decision in corporate history.

The take from the WUTC case, though, is that there is a level of short-termism that decision makers exhibit, at times, that when pondered on one is only left wondering how they could do that.

Could the ongoing public spat involving mobile telco giant Econet against state-owned mobile counterpart, Net*One turn out to be another case of a corporate decision making blunder with far reaching negative consequences? If the facts on the ground are correct, Net*One owes Econet $20 million for interconnection fees and has been refusing to settle.  That is not acceptable in business; debtors must honour. It would appear Econet got irked by Net*One's alleged flouting of the interconnection agreement and decided to take the bull by its horns and disconnected the defaulter. In ordinary course of business this is the way to go, but in this case there may be unintended consequences.

Firstly the timing might be extremely wrong on Econet's part considering that there is a pending election in the country and policymakers are more likely to make political decisions rather than economic ones. Because it was the first to be licensed and had the farthermost reach that including most rural and farming areas, until recently, you would expect Net*One to have many senior government officials as subscribers on that network. That momentary disconnection meant these guys were unable to call nearly 70% of the aggregate subscribers and that may have pissed off some in high offices. "Kunenge kudenha mago or ukuqala olonyovu", as some would want to call it.

For Net*One to dispute such a material claim, its management should have caucused with the shareholder and indeed in its circular it made reference to the parent ministry. So in essence the duel transformed from being just between Econet and Net*One into battle between the two entities shareholders. That implication made it all the more worrying because Net*One's shareholder is the government of Zimbabwe which coincidently is also the regulator, through POTRAZ, of telcos.

Econet's license is due for renewal in the coming year and the company will be facing the same guys, indirectly as it may seem, and hope to get a fair treatment. Considering that it was no easy task for Econet to get its initial license, no one would have probably expected them to pick a fight, directly or indirectly, with policymakers and risk disturbing a $677 million dollar business (according to a Forbes valuation), for $20 million, they may still get in future.

I am not an advocate for freebies but clearly even a layperson can see that if push comes to shove, it may be beneficial for Econet to 'park' that issue and write off the interconnection receivables due from Net*One than jeopardizing the business license should things degenerate into a political fight. That is good politics, in my view, especially considering that Econet already enjoys as much as 70% of intra-network calls while it has no problem with the second biggest network, Telecel. Talking about Telecel, I must state I enjoyed how they grabbed the opportunity by inserting an advert saying, "Join the network that gives you access to all networks!"

In the WUTC case, Orton considered $100 000 to be worth more than the future of the business and the opportunity cost proved to be beyond management's imagination. Not saying that Econet is going to suffer the same fate but some avenues are not worth exploring and who knows what might open a business' "Pandora's box". We believe the mantra of "Don't fight the Fed" is appropriate here. There are some people that probably have a gun with an unlimited number of bullets and it is wise not to start a war with such. It is unfortunate but that is the reality which Econet, even though it feels aggrieved, may need to live with it for now.