BusinessSectorsMobile money brings long-awaited innovation


Posted on Wednesday, 18 July 2012 11:08

Mobile money brings long-awaited innovation

By The Africa Report

Over a million subscribers signed up for EcoCash in six months/Photo/TSVANGIRAYI MUKWAZHIDollarisation brought with it a swathe of investment by operators, rolling out new products and capacity to a population hungry to communicate.

 If any country was ready for a mobile-money explosion, it was Zimbabwe.

With dollarisation in 2009 came a complex mixture of multiple currencies whereby the dollar, rand and pula are all legal tender, and shopkeepers lacking small change hand out IOU slips for tiny amounts.

Although Econet Wireless was not the first operator to launch a mobile money product on the Zimbabwean market – government-owned NetOne launched OneWallet in January 2011 – its EcoCash product has seen a remarkable take-up, with over a million subscribers signing up in the first six months since September.

The operator's chief executive, Douglas Mboweni, is targeting 100% use of the product within 24 months. He explained that remote top-up using EcoCash is removing distribution costs, currently at 10-12%. "We believe that those will come down to as little as 3-4%,"says Mboweni.

The success of EcoCash reflects the population's appetite for new services that telecoms capacity operators have rolled out since 2009. Mobile penetration rates that stood at 11% in 2008 are now at 74% and rising. "We went through a very dark period before dollarisation, when it was hit or miss whether you could make a local call," says Geoff Goss, chief executive of ICT-focused private equity firm Matamba Anonaka. There have been "huge improvements", he adds.

Econet is the leader of the GSM mobile providers, with 6.2 million subscribers in March 2012 compared with the 1.85 million of NetOne and 2.2 million of Telecel Zimbabwe, the latter run by Egypt's Orascom, according to industry specialists Informa Telecoms & Media.

As telecoms operators across Africa furrow their brows over graphs showing the decline in the average revenue per user (ARPU), Econet's ARPU is rising: from $9.78 in February 2011 to $10.33 in February 2012. A SIM registration exercise in March 2011 that saw 1.4 million subscribers cut off did nothing to dent profits, and the subscribers had all returned by August.

Competitors close gap

Kalyan Medapati, a senior analyst at Informa, believes Econet's dominant position is under pressure. "Both NetOne and Telecel have been aggressively investing in their network, expanding the footprint," he said. "Telecel has earmarked $70m, and NetOne secured $45m from the Chinese EXIM Bank last year and is making efforts to double the fund this year."

In a tight economic environment where liquidity is at a premium, Econet has been able to leverage funding through its South African-based parent, Econet Wireless Group. In May it was putting the finishing touches on another $307m loan facility.

Econet was the first operator to roll out 3G services in Zimbabwe, and it has had to pump more 3G base stations into the urban centres of Harare and Bulawayo to cope with demand.

It is also migrating its network from microwave transmission to fibre optics for the same reason. In May, Telecel told analysts it was also running 3G services off the back of a high-speed packet-access network in Harare.

The big question mark hanging over the Zimbabwean market is the fate of NetOne, which the government is trying to privatise along with other debt-laden parastatals. Despite reported interest in 2011, no foreign-based operators have been enticed, probably because of an indigenisation law that stipulates control shall lie with Zimbabwean shareholders.

"Anything short of a controlling stake would not be in the interest of MTN or Bharti Airtel, and the government might not be so inclined," said Medapati.

The telecoms market is already getting much more competitive, as 12 licenced internet access providers begin rolling out consumer offers. One, Africom – which also has a code division multiple-access licence – is advertising unlimited calls for $10; another, Broadcom, offers them for $15.

Goss believes the Zimbabwean market is ripe for a mobile virtual network operator (MVNO), which uses leased network capacity to launch a new mobile brand. His company was in discussions with Telecel about setting up an MVNO, but the issue cooled last year when new management at Telecel started a large investment drive in infrastructure●

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Last Updated on Thursday, 19 July 2012 16:45

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