NetOne, the second largest mobile telecommunications company in Zimbabwe, launched OneFusion, an integrated prepaid package, in June 2016.
OneFusion bundles offer some of the best value for money on the market. The comprehensive plans offer users on-net and local and international off-net voice minutes as well as SMSs. Users also get data, some of which is in the form of WhatsApp, Facebook and Twitter bundles.
In November 2017, NetOne launched a $3 OneFusion package to supplant the $5 package as the cheapest OneFusion package on offer. For subscribers getting 60 minutes On-Net, 10 minutes Off-Net, 250mb Data, 10 SMSs, 250mb WhatsaApp and 250mb Facebook all valid for 7 days for only $3, that’s as good as it can get.
Why was OneFusion launched?
What about for NetOne themselves? Has this popular prepaid package achieved what it was meant to achieve. The OneFusion packages were designed to increase NetOne’s subscribers, revenues and profits and if that has not happened we can’t really say they are a success.
With promotions like OneFusion, the thinking is that such affordable packages will attract new customers and more customers will lead to more revenue and ultimately increased profits. Seeing as there are close to 14 million active mobile subscriptions compared to a population of around 16 million, new customers will mostly have to be those moving from another telco. That makes it a bit more difficult.
The other problem is that generally these promotions which offer services at a discount decrease the average revenue per user. That means for the company to see an increase in profits there has to be a proportionately bigger increase in subscribers, something which is difficult as we noted.
You may have noted that the number of active mobile subscriptions is almost equal to the number of people in the country. If you consider that around 40% of the population is under 14 years of age, you quickly realise that most adults must have multiple lines, with the different mobile operators.
The competition between the mobile operators led to this state of affairs. The bargain-hunting Zimbabweans simply pick and choose which line to recharge depending on which telco has the better promotion at any point in time. This means promotions like OneFusion may not yield the intended results if the gained subscribers revert back when the promotion ends.
NetOne’s number of subscribers since introduction of OneFusion
As mentioned, OneFusion was introduced in early June 2016, that is the last month of Q2 2016. We will look at number of subscribers from beginning of 2016 to third quarter 2017. POTRAZ is yet to release the quarterly report for Q4 2017.
Q1 2016 – 4,360,298; Q2 2016 – 4,512,359; Q3 2016 – 4,619,498; Q4 2016 – 4,712,410
Q1 2017 – 4,801,762; Q2 2017 – 4,845,458; Q3 2017 – 4,868,897
Any meaningful impact that can be attributed to OneFusion has to be from Q3 2016 going forward. The number of active subscribers stood at 4,512,359 at the beginning of Q3 2016 (end of Q2) and this rose to 4,868,897 at the end of Q3 2017. That’s a 7.9% increase or 356,538 in absolute terms.
In that time the OneFusion-less Econet grew by 422,339 subscribers or 6.3%. Econet has repeatedly refused to be dragged down into a price fight. As such they have never really had a promotion offering bargains as good as OneFusion or Telecel’s MegaBoost. For Econet, quality of service and the accompanying ecosystem which includes the subscriber-pulling-and-retaining EcoCash are some of the differentiators.
Offering discounted products is not the only strategy for growing subscribers and it might objectively be said that it’s not the best either. However, had NetOne not introduced OneFusion, would they have seen that growth in a period where Telecel only grew by 4,552 subscribers? Probably not. So we can say with some confidence that OneFusion is responsible for a large part of the 356,538 increase NetOne experienced.
NetOne’s revenue and Average Revenue Per User (ARPU) since introduction of OneFusion
As you know, NetOne is a parastatal and is not listed on the Zimbabwe Stock Exchange and so is not obliged to publish annual financial statements. NetOne only sporadically releases some financial information which is not sufficient to monitor trends. Luckily for us POTRAZ releases revenue market-share figures that we can manipulate.
Let’s look at NetOne’s market-share of mobile revenues from Q1 2016 TO Q3 2017
Q1 2016 – $28.5m (17%); Q2 2016 – $29.9m (18.5%); Q3 2016 – $29.8m (15.3%); Q4 2016 – $26.8m (This Q4 figure was found by using the annual revenue figure of $115m as given by NetOne themselves)
Q1 2017 – $24.3m (13.5%); Q2 2017 – $26m (14%); Q3 2017 – $27.2m (12.1%)
OneFusion was introduced end of Q2 2016 or beginning of Q3 when NetOne’s share of mobile revenues was 18.5% and since then it has fallen to 12.1%. So if OneFusion has helped increase revenues, it has not been by a comparatively higher margin than the competitors’ growths.
In absolute terms revenue has decreased to $27.2m in Q3 2017 from $29.9m in Q2 2016.
NetOne announced that for the financial year ended 2016, of which OneFusion was available for 7 months of the 12, revenues increased by $1m but losses of $2.7m were realised. Revenues for 2015 had been $114m and in 2016 that increased to $115m. The revenue for Q4 2017 will have to be at least $37.5m if NetOne is to avoid posting a decrease in revenues going from 2016 to 2017.
Average Revenue Per User for Netone (using number of active subscribers and not total subscribers)
Q1 2016 – $6.54; Q2 2016 – $6.63; Q3 2016 -$6.45; Q4 2016 – $5.69
Q1 2017 – $5.06; Q2 2017 – $5.37; Q3 2017 – $5.59
The introduction of the OneFusion package had the effect of reducing the ARPU in the short term as was expected. Compared to where the company was before OneFusion’s introduction, it would appear the prepaid packages have not had the required effect. However, for both revenue and ARPU there was better performance in Q2 and Q3 2017.
Has OneFusion been a success?
At its launch back in 2016, the NetOne CEO said the company expected OneFusion to lift them to the top of mobile telecoms in only 2 years. The 2 years are up in June this year and NetOne are nowhere near the summit.
In summary, since OneFusion’s introduction (Q2 2016), NetOne’s active subscriber base grew by 356,538. Revenue per quarter has decreased from $29.9m in Q2 2016 to $27.2m in Q3 2017 and average revenue per user has decreased from $6.63 to $5.59.
As we noted above, these discounted packages may not necessarily be the best strategy for growing a company’s profits. OneFusion may be the best promotion on the market but most of NetOne’s customers have Econet lines because EcoCash has become an essential product.
What do you think about OneFusion and its meagre contribution to Netone’s bottom-line? Do you think it will pay off in the long term? Let us know in the comments below.
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12 comments
W……
I wonder how much of a role ECOCASH has played towards increasing those Econet subscriber numbers. In this liquidity situation it’s become an absolute NECESSITY for many – I know a handful of people who only got Econet sim cards just to get on Ecocash. That should be in interesting study…
i guess netone is in the right direction, one fusion has played its part , now one-money should do the same , once the penetrate the mobile money payment system and link with almost every bank and major shops , they will get the trophy.
I agree with above… Slot of my friends and family are one fusion… The trick note is one fusion…. The banks and Netone have no choice they have to offer a cheaper service and make one money more widely available…. Innovate or die
This article is generally on revenues and does not talk about one fusing usage and contribution at all. One fusion is a separate recharge platform and can be singled out and tracked to realize its usage, new clients and the impact on overall revenue.
Im one of those who migrate between the three networks but the major ones being netone currently and econet second. Netone just need to be more competitive and innovative on the other platforms like the money exchange and financial transactions. Like they should really think out of the box and really promote one wallet yavo and make it work. I’m no techie guy but innovations such as cryptocurrecies and block chain technologies they may not be complementing or implementing are the things that can help them compete and edge Econet.
Otherwise kuside ye the pre packaged data, SMS, call services? Netone have econet by the balls on that front..
Yaa it can be so that it dd not achieve much bcoz those promotions must be aided by system upgrade and make sure u continue to upgrade yo netwrk to match wth the number of increasing subscribers
One fusion certainly achieved some non-financially linked goals which they needed for a long time. A big chunk of customers now even pay attention to their existence, brand awareness. This is was critically required. Now they need to leverage that enhance that brand position by paying full attention to a couple of things
1. Distribution network for all their services. Its fairly difficult to find a place to buy Netone SIM cards if you don’t bump into their Orange T-Shirts team called brand ambassadors. Physical presence in more prominent and busy places is vital. Alternatively, use some form of technology.
2. Increased activity and flexible services in the Mobile Financial services sector. Again distribution network is weak in this area. Cash-in and cash-out points are not so readily available or visible. Maybe its an organisational structure problem because Ecocash is run by a separate management team from Econet Wireless but they work closely together. The involvement of Steward Bank in the Matrix also then calls for Netone to go to bed with one of the existing banks and then also work very closely with them on product development.
3. Add other Value Added Services such as Funeral Policies etc. But again this all requires strategic alliances with existing experts in the various areas. Critical to note though is that Value added services such as these may only make an impact when One Money is competing significantly with Ecocash and their bank or partner bank.
** All this will probably take 3 to 5 years to make an impact on Econet assuming that Econet will remain stagnant in terms of customer acquisition and retention strategy implementations AND requires overdrive work on the part of Netone.
*** Netone must make sure that One Money doesn’t fail this time otherwise they will never rise again in the financial services sphere. Ecocash has got over 98% market share in the mobile money sphere and probably increasing as they increase number of services offered from the platform.
*** More interesting is that Ecocash has now got an App which makes them very ready to be able to register customers from other mobile networks as their customers. Kind of a snare for any threats from other mobile operators who may want to increase their SIM card share using mobile money.
What happened to their costs over the same period, promotional costs definitely rose but they could have created more value if they targeted some costs for rationalisation in line with the expected reduced revenue per customer
Well that is what you get for promoting a prepaid $5 unlimited package at the expense of a $60 post paid or prepaid customer. They have a choice to revert and capitalize on the huge subscriber base with a more profitable offer.
This article seems to be trying to unsuccessfully trying to persuade us not to use the cheaper fusion products. Why should l let Econet continue to bleed me. Viva onefusion
true one fusion if marketed good enuf will be a godsend. since the only reason i use ecocash is that i dont have an laternative yes telecel but i have issues with their client service at the moment