Econet Wireless Zimbabwe has issued a public notice that the company will terminate mobile network interconnection services to the state owned mobile operator NetOne today, 23 August 2012. The notice, which was published in Zimbabwe’s print press today, cites the repudiation of their interconnection agreement by NetOne as the reason.
As you may be aware, Econet has continuously complained over the past couple of years, (most recently last month to a parliamentary committee), that government telecoms operators owe it obscene amounts of money in interconnection fees.
In the notice Econet shows that as much as US $20 million (excluding interest) is owed from as far back as 2009. Econet says it has tried engaging the Zim telecoms regulator, POTRAZ, and the government (Ministry of Communications and Infrastructural Development, and Ministry of Finance) to intervene but all has been in vain. The company says therefore that it is “obvious that NetOne was not prepared to honour its obligations” even as NetOne is collecting the fees due to Econet from subscribers.
Econet says it’s ready to reconnect once NetOne “makes a substantial payment towards the historical debt, and commits to meet future obligations on due date”.
We will be posting the full notice shortly.
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. Econet, with close to 7 million subscribers, commands about 70% of the total mobile subscribers in the country. According to the subscriber stats released by POTRAZ for the second quarter of 2012, NetOne has only 1.6 million subscribers.
Update: Here’s the full text of Econet’s public notice.
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19 comments
I think this is fair… Econet has been patient enough. And considering NetOne actually collects the revenues due to Econet from their subscribers, it should be a crime that NetOne has not honoured the agreement.
what does this mean in lay man’s terms? Does it mean if I have an Econet line I can’t call net one anymore and vice versa?
It means join the Econet bandwagon, unless of course paying US$1 for unlimited calls within Netone only, and One Wallet – and not EcoCash – is a big deal to you and your friends and family.
It also means don’t send Ecocash to a Netone number, unless you have the time and money to deal with any eventuality.
Basically, it means Netone is saying choose between them and Econet, you can’t have both worlds.
It also means expect Potraz to intervene.
yes, exactly
The money owed is huge, Netone has not attempted to reduce its indebtedness, and they collect the money and not pass it on to its rightful owners. (to reflect how huge it is – You can use that debt to start a fully capitalised bank that meets capital requirements in 2015 – kikikikiki). You cannot continue to lend someone not paying you back. Econet has also committed to reconnecting Netone if are paid. So there is nothing amiss, its all business. But there is a flip side to it, Netone subscribers rushing to Econet.
As an aside, don’t you think “the recent announcement on infrastructure sharing was a pre-emptive move by Biggie of this development”
Add to that the fact that Netone is running a promotion where for $1 you can call the whole blessed day (24 hours) for free and you see that the money they are losing already is a lot.
wow, NetOne is loosing both sides here…. Members migration (possibly to Econet) will result in further revenue decline for NetOne, thus, extending the repayment, unless if a rich Tycon bails them out.
Mark my words, Econet is going to reconnect Netone whether they like it or not. That is why Potraz exists. What do you think the thrust for infrastructure sharing is for?
Don’t be surprised to find telcoms operators (read Econet) being forced to always be connected to other networks, even against debts of hundreds of millions of dollars, even billions of US dollars.
Econet must simply attach Netone base stations if it wants its money back, but hey Potraz is already suggesting infrastructure sharing. I wonder why that is? Hmmmm. besides, even if they attach base stations, potraz will not allow them to use the specialised equipment since it’s use/sale/export is regulated by Potraz.
And just what Netone property of equivalent value is there to attach when Netone rides on the infrastructure of third-party state-owned parastatals like NRZ, ZESA etc.
Netone as a state-owned entity must realise that when it owes private companies millions, it is undeveloping Zimbabwe and throwing spanners into the economic development trajectory of Zimbabwe, and indigenization too. And being state-owned company, people end up blaming the government for its actions. US$20 million is enough to bankrupt many companies, especially “indigenous” ones.
This is why i have advocated for Netone to be privatised.
You cant have Big Brother (Government of National Unity) being both a competitor (Netone) and the regulator (Potraz) at the same time.
If Econet owed Zimbabwe’s Government of National Unity even 2 rand, the government could easily invoke the Reconstruction of State-Indebted Insolvent Companies Act (a.k.a The Mutumwa Mawere Act) and takeover Econet “Shabanie-Mashaba-Mines-style”.
Econet, on the other hand, has no power whatsoever to takeover Netone, a state-owned company. Potraz and the Competition Commission (Big Bro), would even block Econet’s takeover of Netone, especially considering Econet’s market share.
Anyway, as many entrepreneurs and the public, voters especially, read such stories, they become sceptical about doing business with Big brother & Co as it becomes obviously that you can easily be bankrupted when these state-owned companies/parastatals do not pay up, and Big Bro Companies have the muscle to hold on to funds and pay you even after 10 years and still continue in business, when you cannot, or by then you would have liquidated your business.
Netone must pay up. And it will help the image of the government in the eye of the public because as long as the debt to Econet exists, many members of the public (voters) will be of the view that Netone, a parastatal, is treating a indigenous company unfairly. All the more reason why Netone should be privatised.
When netone is privatised, it has the potential to be as successful as Econet, contributing an extra $400million in taxes, on top of Econet’s, and to even raise massive capital abroad as it would not longer fall under the targeted sanctions list, being now a privatised company. it would even raise enough money from teh stock exchange and investors to extinguish its debt to Econet an others.
Thanx for the great read Prosper Chikomo,you seem well read on the matter,it helps one understand why Econet has done nothing for so long,in truth Netone has always enjoyed an unfair competitive and backing advantage over Econet which they have to their detriment failed to utilize and turn into market dominance.
It only took a day! lol
Yes curious, it essentially means that you cannot call some
ne on an econet line from a net one line and vice versa. Once you read the press statement, its actually a wonder that Econet has waited this long to disconnect them
Nay Econet punishing Netone for the later’s $1 a day promotion.
So this will mean I won’t be able to reach friends and clients on NetOne lines. And oh, how many friends and clients do I have who have NetOne lines? Aargh, zulch!
It’s not brainer folks, those laggards still with NetOne better start moving to Econet or Telecel and say seeya to NetOne.
My 2 cents on this situation.
1. Netone is government and it is failing to pay a private company Econet. Government is in charge of the regulator Potraz. A good question to Econet is do they think Potraz will watch when a private company which has a challenging history with government asks for such amounts of money which netone does not have. I do not see Netone paying this money what I actually see is a deal being made here at the end of the day. Econet cannot afford to be in bad books with Potraz. Potraz managed under a Zanu PF ministry as part of the GNU will not watch when a company created by Zanu, Netone is going through such humiliation. Netone does not have this money because in my view their income actually comes from these interconnect fees. Divide that amount owed by 4 (years) and see how much it is per year that they have been making from Econet (tax fress income). The amount is the same as the profit some banks in Zimbabwe are actually making per year which means Netone actually relies on this interconnect fee for revenue.
2. Potaz new rules. Econet must be careful because those new rules are going to force them into a situation that is not financial beneficial and will erode most of their investment from the last five years. They will be forced to share the infrastructure. This is a justifiable move by Potraz which had been suggested not for fareness or the benefit of all parties but the benefit of Netone. There is no investor who will rescue Netone anytime soon due to its government connection. This means the only way to avoid paying the interconnect fees and increase in coverage will be through legislation proposed by Potraz which is a regulator but indirect interested party in Netone. The playing field is not fare at all but it will happen.
3. Econet will not want to see a scenario like what happened to Mutumwa Mawere. He lost most of his companies through legislation passed in parliament. I do not see what will stop these guys trying this move again. Seeing that we still using an old constitution. The Ministry of finance will never rescue Econet because they have no money. They will watch and always identify with the fact that Netone must pay but there is no money.
My suggestion is in a capitalist world where business is a compromise Econet must just reach an arrangement with Netone, Potraz and Government. Disconnecting Netone leads to loss of subscribers from Netone to Econet. Will government watch their investment eroding into a network without subscribers. There are people who will lose their salaries and politicians who will lose their influence. Econet relys on the government in order to operate so they cannot mess that up. They can take them to courts I agree but the courts of today are different from those of the 1990s thats why they chose to disconnect. We have all see how the courts operate.
This is the challenge of being too big in a market where the legislation is polarised. Econet is a threat to the zim government at the moment because they are the richest company and they have their footprint in a number of investments that are successful. This in my view wont make a lot of people happy. So they have to come down and negotiate unless they want to operate in a hostile environment!
Yakutomakisa, kutikisa kushandisa netone service.
There are legal documents binding operators as far as interconnection fees are concerned. Netone needs to pay the money and econet has stated they only want a substantial amount but netone being netone have said they are not obliged.
netone is not paying anyone and being a baby of POTRAZ and the government, services will be restored. its just a 4n call to Mboweni nekuti all ministers and big wigs who have netone contract lines will be affected. Telecel however has capacity to accomodate more pple on their network…..Econet cant carry more subscribers
POTRAZ now wants to pass a law for operators to share infrastructure, this is so to allow Netone to install their 200 million dollar equipment at the many base stations econet has installed around the country.
The legal route will be the way to go for Econet. They have won the battles before……
Netone hits back – spills
the beans .Telecel jumps for opportunity .
Events this week leading to Econet disconnecting Netone due
to an unpaid interconnection fee of about $ 20 million have opened can of
worms. Netone claims that the interconnection agreement it had with Econet
expired in 2006.And only in 2009 after the inflationary period did they submit
an interconnection agreement to POTRAZ which is still to be approved . Netone
responds viciously and exposes Econet’s dirty linen or is it ?
During the inflationary period Econet in 2008 Netone claims
that “Econet unilaterally transferred its post-paid customers to their prepaid
platform on the pretext that their billing system was malfunctioning and yet
the motive was to get cash before its value was eroded by inflation.”
23 cents per minute instead of 16 cents per minute. In a
stunning admission that Netone and all other operators schemed to agree to
charge poor Zimbabweans $ 1 for 4 minutes. $1 juice card allows you to talk for
4 minutes which translates to 25 cents per minute.The long held notion that
mobile operators charges in Zimbabwe are too high has been confirmed thanks to
the disconnection of Netone by Econet. Read on and thanks to POTRAZ’s
ineffectiveness.
Now interconnection charges between networks is 7 cents.
Under the current interconnection regime users pay 23 cents across networks. Subract
7 cents and the operator retains 16 cents. Now remember the operator still will
get an additional 7 cents per minute for all calls made to their network.
Fraudulently I must dare say here that the internationally recognized SENDER
KEEP ALL interconnection approach was not “preferred” here. SENDER KEEPS ALL
means that if Netone sends 100 calls to Econet and Econet sends 200 calls to
Netone , the later Econet will net off 200-100 calls to Netone and hence retain
the money for the 100 calls to Netone instead of billing Netone. The 3
companies ganged up NOT to use this principle that would have resulted in you
and me paying 16 cents per call as compared to the current 23 cents.
Calls should be 16 cents per minute and not 23 cents per
minute since these networks are interconnected. A commission of enquiry must be
set up and these telco monsters brought to book.
Lastly Netone accuses Econet of a criminal offence by
unlawfully and willfully impeding the transmission of communication services
between customers …….threat to national security. Netone there is no such thing
as free lunch pay your dues.
Telecel the other operator placed huge adverts in all papers
today saying “ JOIN the network that gives you access to all other networks
today. “
Bottom line some sanity must be restored . We know very well
that the 3 operators are over charging us and are not so sure what role POTRAZ
has in this. Recently POTRAZ announced that it will enforce infrastructure
sharing amongst operators so that setting up of base stations could be
reasonable and hence the savings passed on to end user . One operator already doesn’t
like this. The game is changing and fast. Another area that must be
investigated is the international call termination. These providers and POTRAZ
agreed to peg international calls coming tinto Zimbabwe from outside at 20
cents per minute minimum. But as all those in diaspora know , you don’t get
much talk time using a $ 5 talk time calling card. We all know that the cost of
international calls has dropped drastically ever since the introduction of
fibre optics across oceans. Satelite connections are very expensive and hence
in the past making an international was a big issue. Now these operators are
now using high speed fibre circuits to connect to and from international
destinations at the fraction of a cost which they haven’t passed to the end users
whether in diaspora or in Zimbabwe. Come on now
, why do you think making calls on Skype is free ?
Interesting times ahead.
Very informative reply indeed. But i have one question to ask. Was Net one billing Econet for the interconnection charges or the balance is less claimed by Econet less the bills by Netone? If Netone acknowledges billing Econet or receiving and accounting for the interconnection bills in their financials, then they have no defense. The issue about the contract becomes invalid if you acknowledge and account for the bills in financials. On an interesting note, I see Zimra owing 5 million to Econet if Netone manages to convince the High Court that interconnection charges are illegal. As for Potraz I think they should dismount from the high horse and start talking unless of cause if they were benefiting from the shady arrangement that has been ripping us off for years.