The 2012 annual report sent out to Masawara shareholders over the weekend revealed that Dandemutande, an internet provider they have shareholding in, incurred losses amounting to US $4.9 million during the year ended 31 December 2012. Masawara’s share of the loss was US $3.4 million. The losses are attributed mainly to the retail and consumer internet division, which is called uMAX. This the second consecutive year that the business has made a loss. In 2011, Dandemutande suffered a 3.2 million loss.
High expenditure, delayed rollout & expensive internet
The losses, according to the report, are due to fixed operating expenditure incurred for the WiMAX network, and costs related to the testing, marketing and launching of the network. uMAX launched services back in June last year bringing high quality consumer internet to the market. But the service was pricey and the rate of customer acquisition was slow. As a result, the company made lower than expected revenues and went into cashflow problems.
Some delays experienced in the launch of the WiMAX network also resulted in the business experiencing cash constraints, the report says, and this was just compounded by the lower than projected customer acquisition.
Low confidence from investors
The report also indicates low confidence, at least in the short term, in the ability of the business to become profitable, especially in such a highly competitive sector as telecoms. “Due to losses incurred by Telerix and cash flow constraints, there is also a risk that the investment in Telerix, debentures and preference shares subscribed in this associate may be further impaired in the future,” says the report of the investment in Dandemutande. Telerix is the company that owns Masawara’s 50% share of Dandemutande.
“The losses and cash flow constraints experienced cast doubt on the ability of Telerix to continue as a going concern without financial support from its shareholders” the report says. According to the report the shareholders have however pledged to continue supporting Dandemutande with “sufficient” funds based on new projects of the business up to June 2014.
The report further explains that even with the rescue, there is risk that the pledged support may still “not be adequate due to unfavorable changes to the initial cash flow forecasts, the economic environment and increased competition which in turn may negatively affect the going concern of Telerix”.
You can download and read the full report here.
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41 comments
So are they trying to say that uMax is going down?
I don’t think that’s what they are saying. My guess is that they are making losses losses now because they are investing in growth – you have to sow before you reap you know… IMHO.
It was expected. The idea seemed good but was totally ignorant of its market. Many new tech companies lose sight of that fact. Their projections are only focused on sales without accounting for the actual market.
In a dollar-for-two economy, you cant expect to gain much for the masses who will not spend hard-earned cash on very high internet charges.
(remember Spirit Age/Brodacom)
I guess the best lessons are learnt from failure.
I personally know some execs from uMax and indeed they’ve spent a lot on testing and building infrastructure. You’d be surprised to find that UMAX actually spent the last 2-3 years testing their network yet most people only think it emerged very recently.
So do I think its going down? Not anytime soon. Umax is taking the long term vision here by charging people heavily subsidized internet like with their $75 package. I think they’re hoping to build market share first so that in 5-10 years time they’ll actually be really profitable as they’ll have a great chunk of home and small business users. Unfortunately people in Zim are used to the Econet way of being charged as it seems their bundle prices are trying to pay off all those HSPA upgrades in a matter of months which is why Econet can easily post millions in profit instead of striving to serve the consumers real needs.
Unfortunately for uMax though, I think they’ll need to spend even way more money for infrastructure as their coverage is somewhat limited especially if you live in a “hilly” area. My area had no coverage and I was keen to sign up with them so were my 4 other neighbours!…Now we’re stuck with ZOL or Yo. But I believe if uMax can address these coverage problems, then Im sure more people will pick up their product and they will gain a larger share of the market.
One last point though on what might be the ultimate downfall of uMax aswell as other Wimax providers such as Yo. Technology is moving forward and frankly Wimax is not keeping up as LTE is the new standard. In SA iburst and them are having trouble with their Wimax networks as they are now up against LTE from MTN and Vodacom. So maybe if uMax really wanted to deploy a long term strategy, they’d begin on building an LTE network as I believe for data, that is where the money is going to be. Oh ya, and also fibre is creeping into peoples homes and to be honest its actually being adopted really fast!…Guess us Zimbo’s love the future…though ofcourse these early adopters are paying through their a***** for the fibre!
A bit of a long comment…I know… but I was bored doing my work 🙂
I like the analysis. It’s informed I hoped you get bored more for our sake.
“I’d like to set the record straight on some issues raised by TechZim in its analysis of the Dandemutande 2012 results. Firstly as a new start-up requiring significant
capital expenditure, the business was expected to incur losses in its first
year of operation of the uMAX service which has only just celebrated its first
anniversary. The uMAX team has successfully established customer confidence in
its ability to deliver quality Internet and overall customer experience to the
Zimbabwean consumer. Customer acquisition has rapidly scaled in 2013,
especially following the launch of monthlyMAX in April 2013 which has set a new
benchmark in access to Internet services. I would like to reiterate in my role
as Chairman of Dandemutande that the shareholders remain committed to the
business and have recently concluded new funding to support the business in its
ongoing activities.”
Joe Mutizwa, Chairman, Dandemutande Investments (Pvt) Ltd
Hi Joe, i agree with you 100%. There is nothing unusual about a telecoms business making losses initially. In fact, a greenfield telecoms business is expected to average 5 years loss making in a high growth and less saturated market. In mature, competitive markets like zimbabwe, the period can be 7 years. The value in telecoms start ups these days is in capital gains. It should be noted that the consumer internet business model is relative new and as such pre-mature for for analysts to make judgment calls on results. i make these comments from an outsider perspective – without knowledge of how much was invested and what the so called loss translates to as a ratio and if its at EBITDA or the bottom line. Keep on keeping up. we need a vibrant successful industry.
Is Zimbabwe a ‘mature’ market? It’s certainly compettitive #nitpicking
Really impressed at how you monitor online discussion boards like this one as this is a good place to pick up on cosumer needs and opinion.
And dont worry too much about TZ’s wrongful analysis, we often find ourseves correcting them in the comments as you have just done 🙂
No analysis done in the article. Just echoed their Annual report. Read the full report.
LsM just echoed what had been reported.l would suggest that this is the right time for Liquid to pounce on Umax as they are in great need of finances.Liquid will make this a profitable company…….
But Liquid already owns ZOL which already offers WiMax so Im guessing it’ll be redundant for Liquid to purchase another Wimax company especially since ZOL and Econet Wimax services were combined meaning that ZOL already has unbeatable Wimax coverage so why on earth would Liquid consider aquiring another company.
in a way they can increase the market share and take the environment by storm and cause serious shake up in the market you may never know NEVER SAY NEVER
It will create a monopoly not a shake up. Plus telecoms is very CAPEX dependent. Econet has spent millions into their network but their profits may only start to filter in after some years. I read it may take at most 10 years for a telecom company to really start milking it. Issue is Zimbabweans love to pour money into businesses/ventures and want super profits in year one. Not happening as this is not a supermarket. This sector needs long term investment and patience. Google is spending millions on it’s self driving cars and the glasses but no money yet in return. Shareholders in my opinion are just being greedy. Wait another 5-8 years and then ask questions.
BTW, Mark Zuckerberg had also a torrid time dealing with investors after some poor results. But the thing is he managed to wade them off by showing a roadmap and explaining well some of the things FB is doing to make the money. I think Joe has his work cut out for him.
“Econet has spent millions into their network but their profits may only start to filter in after some years”
Lol..you must be using another network if you think Econet has not begun to earn profits. You should see how airtime mysteriously disappears and how quick your airtime drains if your data bundles finish and they begin charging you the out of bundle rate!
Yes, OOB rates use your airtime faster than you use it to make voice calls. That’s “normal” network “behaviour”, even here in SA. At R2/MB OOB with VodaCom/MTN, you can be assured that R20 will “disappear” in a flash if you decide to watch YouTube or use Google maps on your phone.
With Econet, all I am saying is in 1998, shareholders were not screaming at Masiyiwa for dividends and they knew that the business needs every single cent to create the infrastructure. Look at Apple or even Microsoft. They only started paying dividends after what seemed like eternity. Shareholders will always moan and groan about wanting a few coins in their pockets every year but as CEO, one must show cause why some things happen and drive your points home firmly without “blinking” else the investors will show you the door like the way they did to Jerry Yang of Yahoo!.
may you please shut this website , it causing too much harm than good , POTRAZ may you please do something before all the ISPs become a thing of the past
What are you talking about ,(the snake).This is just an article which is bringing into light what is really going on at uMax…..Freedom of expression is valued @127eecccc61bf341cea550b27b74ff60:disqus Techzim is the way to go you Snake SHUT UP….
It is quite obvious the Chairman of Dandemutande will try to dispell anything bad ,even if its true which is coming out about Umax.He is just trying to make us think all is well at Umax.
Umax has many limitations which include its coverage which is only limited to a few places in Harare(Affluent Northern Surburbs) it fails to put coverage where the masses are ,that is one reason why they are making losses and whoever is running Umax has never run a Company at that level
I’m in Highfields and I’m a uMAX client. As much as they don’t cover the entire city, I’m sure that they are working on addressing that. And with any new company which has massive CAPEX, it’s not unusual to make a loss in the first few years of operation. Can someone please verify whether Econet made a profit in their first year of operation?
Seeing uMax is in it for the long haul, someone please clarify on the specs of their network so we know how relevant they will be by next year. Will I be able to get 10Mbps with uMax?
you cant get 10Mbs , you need fibre for that. WiMAX is limited and if they are to give you those speeds they will probably be able to serve three customers per base station.
Theoretically speaking Wimax can reach 84mbps though real world speeds seem to be around 5-10mbps in other countries. But for some reason in Zim it seems most ISPs have capped it 2mbps and I dont see that changing anytime soon unless you pay for the 4-figure a month packages! But hey, 2mbps is actually pretty fast though in the future it will ofcourse be too slow for the masses as people continue to develop their thirst for data.
Very misleading, there is no real world example to back either claim.. not 5-10Mbps let alone 84Mbps!!
I’ll quoute myself: Theoretically speaking Wimax can reach 84mbps”. Key word THEORETICALLY. So yes, real world that can’t be seen.
However 5-10mbps very achievable. I was in New Zealand and Australia where wimax speeds were in that range.
Come on Ndini Wenyu , dont let Zimbabwe’s slow internet brainwash and fool you into believing wimax cant go past 2mbps.
P.s. If you want proof then check this test done on Verizons (USA) Wimax Netowork: http://www.dslreports.com/r0/download/2101816~063fcc9f95873f19aa0a43748543b7cf/2629_736
And more proof: http://s4gru.com/index.php?/topic/2888-fastest-speeds-ever-seen-on-wimax/
So please let keep ignorance off the discussion boards.
uMax is Wimax and Wimax as a technology Wimax failed to deliver despite how much providers tend to sugar quote it. I know providers are starting to look at LTE as the wireless broadband solution for the future. Someone rolling out a Wimax network now is not very bright.
Why dont you have office in Bulawayo ? Or do you have an agent here ? Do you have a licence for Harare only ?
We have made considerable progress towards establishing a presence in Bulawayo and will advise once we start offering services there.
You ISPs can’t all run a business by chasing the few folks from the “leafy” suburbs (all 215 of them) while you leave millions of us people stuck with pirated DVDs and ZzzzzTV. Forget the little facebook and twitter icons you all have on your adverts – we have that on our phones already – sell me the internet like you are selling me entertainment dammit. If any Internet Service Provider were to provide uncapped (or at least 20GB) streaming-fast internet at the price of DSTV’s compact bouquet I’m sure a lot of guys will be willing to drop DSTV for internet easily. I think maybe sell your product more as an entertainment package for web TV, Xbox live, Netflix and internet-only entertainment etc. DSTV is your competition because that’s what Zimbabweans are paying a lot of money every month for right now yet the internet is be a better multi-dimensional two-way version of DSTV on steroids if it’s sold that way. DSTV has somehow managed to squeeze a lot of money out of the kind of people Obama calls poor without complaining, why? because they sell entertainment and content not Decorder specs and Satellite Dish diameters. I don’t even know the specs of my decorder, Maybe DSTV is using ancient technology, who cares… I don’t.
I agree with your sentiments on how sad it is to see all these ISPs chasing those in “leafy” suburbs though I live there too just unfortunately in a black spot for most wireless options as it is in an area with hills. There’s soo much business in areas such as Westgate, Malborough heck even Tynwald! But these ISPs are chasing down the same customers that already have access to reliable internet instead of tapping into the rising middle class in those neighbourhoods that are sick of Powertel, Africom etc….This is why Econet at the present moment has everyone beaten as they do offer really fast 3G in those type of areas though their pricing is some what devilish and if another ISP can come with stuff like $10 a gig and offer comparable speeds to Econet they will be home and dry with the data market.
“if another ISP can come with stuff like $10 a gig and offer comparable speeds to Econet they will be home and dry with the data market.”
Its not like Econet itself would be folding its hands and waiting for whosoever to do as they wish. Life is probably going to get tougher for some of these ISPs, as far as speed is concerned. FYI, Econet has already installed a couple of ‘Trial’ LTE sites in Hre, Byo and V. Falls. Kicking off with 10MHz bandwidth that should see theoreticals of >50Mbps DL and >25Mbps UL. If the actual speeds land at even half that, internet should be a rocket (well, by zimbabwean terms, for now!)
I certainly hope by the time they launch this LTE network their pricing will drastically be different as you can imagine the uselessness of 50mpbs with a 2.5Gb bundle at $50. You’d be able to burn through that data in an hour!
I live a stone throw away from Utande HQ and maybe there base station.
When l read about there service offering here, l was impressed and went to their offices to find out. I asked if l could buy the equipment since l live in the city and very sure l could get a good signal.
I was told no, they need to do a site survey first, then make a decision if l needed a indoor or out door unit which l thought well, it was fair enough. I asked when can that be done, the lady(l have the name) told me by the time l get home the engineers would either be there or around the corner.
A week later l went back and asked what happened and was told to wait as they were going to launch a new product with dongles etc. But l said that should not stop a survey!! I was assured that they will come.
Over 18 months now lm still waiting, anywhere, l have lost interest!!
Some of these losses incurred by uMax was just their own making.
that’s a shocker indeed, i guess you’re not alone.
well IMHO uMax brand looks more organised and has the potential indeed. at one time i was hooked to their uMax in the City game. That’s some cool beans right there.
However i am not surprised at the huge loses, i contacted these guys via their contact form requesting service for my mom in Tynwald and guess what, they are yet to respond. That’s more than 6 weeks down the line 🙂 seriously…Haulume pakadai, i thought they did not respond because they are always busy servicing the nation but with such results eish sorry kwazvo.
Oops, sorry, our apologies for that. It seems that your enquiry somehow fell through the cracks. Please expect a call from one of our representatives before lunchtime today.
thanks.
I got a call from your representative. Hoping for the best cheers.
Still waiting for yu to boost the Ardbernnie station so we can get coverage in Mainway Meadows. Please hurry!
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