The ManicaPost
Post Business Correspondent
As young kids growing up, we were always encouraged to share. We were told that sharing is caring.
| as we grew up, we started accepting that winning is everything. We wanted all the glory to ourselves and wouldn’t dream of sharing it with anyone else. Such is human nature. Even in business, winning is everything. |
Worldwide, companies are fighting for the biggest chunk of an ever shrinking market. That is despite the fact that they could make more money if they work together to come up with innovative ways to make money.
This is what has been happening in the Zimbabwean telecommunications sector. Mobile network companies have focused their energies on snagging as many more mobile and internet subscribers than their competitors. In the process, a lot of investment into infrastructure has been made by each of these companies to ensure that they succeed in getting subscribers.
But having so much of the same infrastructure from different companies hasn’t really brought joy to the customer. Mobile and internet service has remained expensive regardless of the high penetration rates being recorded.
For the whole of Africa, smartphone connections have been on the rise, reaching 226 million by the end of 2015. It is estimated that there will be more than 700 million smartphone connections in Africa by 2020, which is more than twice the projected number in North America and not far from the total in Europe, according to GSMA, an association of mobile phone operators.
Internet penetration has also jumped from very low levels in 2009 to 16 percent in 2013 and over 20 percent in 2015 following major infrastructure expansions– from upgrading and installing submarine cables and backbone networks to various experiments to get rural and peri-urban Africa online.
But the issue of affordability remains a problem for Africa as a whole and Zimbabwe in particular.
And the major reason why communication costs remain expensive is that companies are not making the huge profits they anticipated when they invested in infrastructure.
For years, Government has been persuading companies to share their infrastructure with little success.
The three mobile network operators — Econet Wireless, NetOne and Telecel Zimbabwe — have invested in thousands of towers to cover the whole country and also embarked on network upgrades to support data services and their fast-expanding m-commerce and m-banking facilities. But there have been little sharing of this available infrastructure. Liquid Telecom and Econet Wireless have made the widest investment in terrestrial fibre and mobile network infrastructure in Zimbabwe and have expressed their skepticism of an infrastructure sharing arrangement that ties them with State-owned operators.
Econet is on record saying the company would only consider sharing its infrastructure after recovering costs. They feel they have invested too much money into their infrastructure to let anyone just come and ride to success on it. They probably felt that Government’s initiative to share infrastructure was a way of disadvantaging them.
But ICT Minister Supa Mandiwanzira has shed light on a broader development agenda beyond this current discussion.
He says Government intends to capitalise on the current digitisation programme to develop a robust infrastructure rollout that is not just commercially based but also focuses on equitable development. Government is seeking to avoid duplication of efforts in deploying infrastructure and to consolidate the current infrastructure in a manner that will reduce the cost of communication and doing business in the country as well as the price of data.
The Government also plans to set up the National Infrastructure Company (NIC) which will focus on building new towers to ensure countrywide connectivity.
This then brings to fore the question of which resources MNOs might or should share, and how they can or should compete even with other operators with whom they do share facilities without disadvantaging the owner of the network infrastructure.
Market watchers believe mobile network sharing is now an established strategic choice for the industry. Instead of just sharing tower sites, the number of operators who are sharing active components, such as antennas, combiners, transmission links, and even transceivers, of their network are growing.
They, however, say for this to work, questions about loss of network competitiveness, ownership of assets, and regulatory directives all need to be addressed if the potential benefits of network sharing are to be realised.
Maybe this is what Zimbabwean MNOs have been afraid of.
KPMG says network maturity is a very important aspect that drives infrastructure sharing. “In countries where the war to gain a customer is still being fought on the grounds of better network coverage, operators will not be willing to share tower assets as it would mean giving away the advantage of a wider/better network,” the audit firm says.
They say if operators have the ability to share towers, they will typically be able to roll networks out much faster while new entrants in the sector can increase their speed of network rollout by sharing towers with existing operators
Thus operators can save on capital expenditure by sharing their infrastructure in a market where profit margins have been decreasing.
Nevertheless, it is not only in Zimbabwe that mobile network companies have been feeling the pinch of reduced profits. South Africa’s mature mobile market which has seen rapid growth since the 1990s is no exception.
Mobile internet now accounts for more than 97 percent of all internet connections, and with almost two thirds of the population able to access LTE services this sector will continue to see strong growth into 2017.
But profits have not been following this upward trajectory forcing MNOs to compromise and increase efforts to share infrastructure.
Unlike in Zimbabwe where smartphone prices are still a bit on the high side, South Africa has experienced a surge in smartphone penetration with the number of mobile subscribers reaching approximately 43 million.
This has made building duplicate networks inefficient in some areas.
“In a saturated market, one of the things that you have to drive is operational efficiency,” MTN chief executive Mteto Nyati told Fin24 last year.
“Think about how big South Africa is; we also need to be covering rural areas. We need to find ways and means of saying where should we be competing and where should we be collaborating? And that requires a certain level of maturity.
“Because our operations are not delivering the same kind of profitability that they have in the past, and yet the shareholders expectations remain the same. That pressure is forcing leadership to become mature quickly.”
This is the attitude that could create a win-win situation for all players in that country. While Zimbabwe still has a long way to go before reaching this level of maturity, the way is already being paved.
The Government has been engaging mobile service providers to slash prices of data to make internet services more affordable. According to the Postal and Telecommunication Regulatory Authority of Zimbabwe, the internet and data market in the country registered consistent growth emerging as the most dynamic market. Internet penetration grew from 45 percent in 2014 to 48 percent in 2015.
But despite this growth, the players in this sector are yet to reach a level of maturity where they can collaborate to increase their profits.
Currently, the most visible players for home internet solutions are Telone and ZOL, who have been embroiled in a serious game of “scratch” that could have drawn blood had their opponents been human.
The two companies have invested extensively in their individual infrastructure growing their footprints significantly. But because the cake being shared is still small, the war for clients has degenerated to slinging mud at each other in adverts. For some time, their adverts seemed to be focused on taking shots at each other.
While aggressive marketing is good for companies trying to establish market dominance, it brings us back to the issue of quality service at competitive prices.
If they were sharing all this infrastructure, would they need to focus on fighting each other in adverts or they would improve the quality of their service to maximize their profits in the long run? The business should not be about who has the most infrastructure, but about who is producing the best results from the available infrastructure.
If they can share the cost of bringing that service to the people, then they should do it. — Zimpapers Syndication.
