THE existence of a data floor pricing system and a freeze on promotions by the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) might have significantly assisted State-owned telecommunications firm NetOne grow its market share, while undermining its biggest rival.
Promotions were frozen by POTRAZ on July 31, 2016.
NetOne added over half a million active subscribers in the year 2016, increasing its market share to 37 percent from 34 percent, according to POTRAZ’s latest report for the quarter to December 31, 2016.
NetOne’s active subscribers grew by 14 percent to 4 712 410 in the quarter, from 4 134 720 during the third quarter to September 2016.
Econet, the country’s largest mobile telecoms company by subscribers and assets, lost 341 687 subscribers to 6 360 904 during the quarter to September 2016, from 6 702 691 during the period under review, while Telecel’s subscribers dropped to 1 805 612 during the period under review, from 1 919 999.
Telecel, once majority-owned by Orascom, was taken over by government last year.
The total number of active mobile telephone subscriptions increased by 1,4 percent to reach 12 878 926, from 12 696 303 recorded the previous quarter.
An active mobile line is one which has been used to make or receive and send or receive a message at least once in the past 90 days.
NetOne’s market share of active subscribers continued to increase starting the year at 33, 8 percent and ending the year at 36, 6 percent. Econet dropped its market share from 52,1 percent in January last year to close the year at 49,4 percent. Telecel’s market share ended the year at 14 percent from 14, 1 percent.
This is the first time Econet’s market share has dropped to below 50 percent.
Econet has always dominated the market.
“Over the course of 2016, Econet and Telecel’s market share fluctuated whereas NetOne’s market share was steadily increasing,” said POTRAZ.
The increase in subscribers by NetOne is attributed to its OneFusion package, which offers voice, data and short message service (sms) at significantly discounted rates.
The unveiling of OneFusion last year saw a new shift in NetOne’s policy and public perception of an old generation network averse to modern technology.
OneFusion is a unified prepaid package that offers subscribers a comprehensive plan that has bundles for on-net and off-net calls, data, SMS, WhatsApp, Facebook and Twitter bundles and international call time.
Speaking during the official launch of the brand last year, acting NetOne chief executive officer Brian Mutandiro said the company had for the past 20 years been ignoring “this important market”.
However, under the current unstable operating environment, cost optimisation while at the same time delivering real value to customers is seen as a smarter strategy. Sustainable business models should therefore be premised on the bottom line. Data traffic growth alone with no supporting revenue growth is not sustainable.
“In a shrinking economy, contracting industry and suffocating regulatory environment, the focus should be on delivering value. The numbers that matter ultimately are not just subscribers, but revenue market share and average revenue per user (ARPU). Econet is clearly ahead when one looks at the POTRAZ numbers,” a market analyst told the Financial Gazette.
Asked to comment on this anomaly where an operator gains subscribers but does not increase revenue, the analyst said: “The POTRAZ report raises deeper questions surrounding business sustainability. For instance, to look at NetOne, which doubled traffic while revenue dropped.”
He said NetOne may have violated the POTRAZ promotion ban when it dropped the tariff by more than half.
“It is clear that NetOne is engaging in value destructive competitive behaviour which the regulator mentioned when they introduced the promotions framework,” he said.
Some analysts said, however that the OneFusion package was a competitive tactic but warned it could erode the network’s value in the long run.
The three mobile companies recorded combined revenues of US$199,2 million in the fourth quarter of 2016, up from US$194,5 million in the previous quarter.
Econet’s revenue share gained 1,3 percent to US$152, 4 million during the period under review. NetOne and Telecel’s share of sector revenue declined by 3,4 percent and 2,4 percent to US$28, 7 million and US$18 million respectively.
POTRAZ indicated in its report that the fourth quarter of 2016 was characterised by marginal subscriber growth across the board with active internet subscriptions also declining by 0,2 percent.
It said this was a sign of general stagnation in subscriptions growth, which could be an indication of market saturation.
“Total mobile revenues increased by 2,4 percent to record US$199,2 million from US$194,5 million recorded in the previous quarter. However, Econet was the only operator to register an increase in revenues. Total mobile revenues experienced an upturn in the third and fourth quarter of 2016. The average revenue per user increased by 0,2 percent to record US$4,50 from US$4,49 recorded in the previous quarter,” said POTRAZ.
The internet penetration rate declined by 0,1 percent to 50 percent from 50,1 percent recorded in the previous quarter. Inbound roaming traffic increased by 36 percent while outbound roaming traffic declined by 14 percent.
The figures show that the country was still very limited in internet usage, with only about half of the population accessing internet services.
This means that over half of Zimbabwe’s population of about 13,5 million do not have access to internet services.
This is despite the fact that about 94 percent of the population has access to mobile phones, and in addition to that mobile data utilisation increased by 19 percent to record 2 567 401 044 megabytes (mb) from 2 157 903 415 mb (1 771, 9 terabytes) recorded in the third quarter of 2016.
In terms of data and internet access outside mobile telecommunications, the POTRAZ report showed that the total number of active internet subscriptions declined by 0,2 percent to reach 6,72 million from 6,73 million during the quarter to September 30, 2016.
Commenting on the POTRAZ report, ICT expert, Shingi Muringi, said it portended a bleak 2017 for mobile telecoms operators as indicated by the 15 percent decline in voice traffic.
These operators had always earned most of their money from voice calls, but the rise in Over-the-Top services (OTTs) like Whatsapp, Facebook and Skype had come at a greater cost for them.
The emergence of these platforms has given respite to millions of Zimbabweans struggling to pay for a range of telecommunications services in one of the most expensive markets in southern Africa.
“The report indicates that mobile money transactions decreased by 35 percent, an industrial sign which prophesy doom for Ecocash, Telecash and OneWallet. These three mobile money platforms had been expected to oversee Zimbabwe’s transition into a cashless economy but the decline of mobile money transactions is a serious cause for concern to all industry players,” Muringi said.
He said despite the fact that total telecommunication revenue increased by 2,8 present, POTRAZ should be concerned by the stagnant internet penetration rate which was hovering around 50 percent.
“This shows that with Zimbabwe’s estimated population of 14 million people, only seven million are active on the internet,” he said.
The POTRAZ report also said the total number of active fixed telephone lines declined by 8,7 percent to 305 720, from 334 828 active subscribers recorded during the quarter to September 30, 2016.