Econet set to compete on product value, not lower tariffs

Last week Econet Wireless held its annual general meeting which gave the company’s management an opportunity to address shareholders on issues related to revenue, profitability and the outlook for the next financial year.

It has been reported that the network operator’s Chief Executive, Douglas Mboweni highlighted that they would not engage in all out tariff wars with rivals as this could affect the company’s financial outlook which is being tempered by the current state of the economy.

The network operator has remained profitable with an annual result of $119,4 million profit after tax, but this hasn’t spared it from the challenges of a depressed economy which contributed to a decline in certain performance indicators.

Added to this challenge has been the reduction in voice revenue, also a by product of economic challenges mixed together with cheaper options for communication like instant messaging.

An aggressive slashing of tariffs has been the default strategy adopted in the past year by the country’s three mobile network operators. This is part of their fight to retain customer loyalty, build subscriber numbers and ultimately boost average revenue per user (ARPU) in an environment where multiple SIM ownership is a common practice.

These massive reductions and promotions across all networks have had notable success though. Econet’s closest rival ,Telecel, and the state owned NetOne, both recorded huge subscriber growth which was attributable, in part, to the enticing discounts for on and off-net call packages. Econet has also played in a retaliatory manner its own tariff slashing games which were at one point halted by the regulator.

Mboweni is said to have mentioned that Econet’s focus will be on further investment into broadband as a way to counter receding revenues from voice services. There will also be added investment into its mobile payments juggernaut, EcoCash, which has already jumped onto an ambitious growth trajectory with services such as the EcoCash MasterCard.

This is hardly surprising and has already been made clear by the broadband services that the network has rolled out in the past year which are tilted towards the expansion of data use.

Another indicator has also been the strong push of entry level smart phones and mobile devices, a strategy that Econet is probably embracing as a long term investment in boosting the country’s low smartphone penetration rate.  This aspect was also highlighted by Mboweni at the annual general meeting.

From the looks of things Econet has decided to beat the competition in service diversity and hopefully customer focus. With the future in telecoms pointed to data services and not voice it’s also a forward looking strategy with eyes on “skating to where the puck is going to be”.

With a Customer Service Charter, heavy investment into broadband and overlay services like EcoCash and this pronouncement of “less on price more on value” approach this could be the beginning of a new form of telecoms service delivery from the network.

It remains to be seen how NetOne and Telecel respond to this new approach from Econet. The fact that these two are locked in a close contest for subscriber numbers will likely mean that they won’t give up on the “all you can eat” tariff specials that they have been dangling in front of their subscribers.

However, a continued declined in voice revenue and a tougher economic outlook just might see them drop these offers. Like Econet will tell its rivals, no matter how successful the tariff reductions are, if they are bad for the business, they have to go.