Locally, the most interesting public relations crisis of 2017 so far, has to be the war of words involving the Minister of ICT and the country’s largest mobile network operator, Econet Wireless Zimbabwe. The objective of the paragraphs that follow seeks to explain in depth the murky business environment in which Econet finds itself operating in and thoughts on better service provision, whilst not making a case for the company, and was inspired by an open letter by Van Lee Chigwada published by TechZim.
To start with, as per several references, Econet Wireless is probably the only Mobile Network Operator (MNO) in the world to be awarded an operating license through the courts, rightly so there will always be outpourings of sympathy for the company, whenever a supposed injustice happens. It is suffice to state that the battle for their operating license is well documented, and it was a brutal 5 year battle.
Nowadays, because of its supposed poor services, bullying and supposed profiteering tendencies, the general populace has grown wary of the company constantly overplaying the victim card. To be honest, the Government of Zimbabwe doesn’t make it easy for Econet to operate in Zimbabwe, despite its sugar-coated rhetoric to the contrary. The ripple effects of this undue pressure are felt by the consumers, who feel that Econet takes them for a ride. It is really a vicious cycle.
Holistically, a glance at the reality exposes that Econet is merely punching above its weight, in a business environment that is not favourable for its operations. For instance, at every given opportunity the company reminds us that it is the only MNO in Zimbabwe that has fully paid the US$137,5 million for its operating license. Ironically, according to local media reports, it made a once-off payment of US$50 million, after negotiating with government to offset part of the license fees with what it was owed by its rivals as interconnection fees. Its rival Telecel which was still privately owned then, presented a payment plan that got approved, and yet the payments were still erratic. As for NetOne, no information about what they have paid or when they plan to pay has ever been made public. The Minister can plead ignorance all he wants; it would be to the benefit of the public to know how much NetOne and Telecel have paid so far for their operating licenses.
Objectively, Econet is a commercial entity whose shareholders always look forward to a golden payday. Moreover, when license fees, taxes, other operating costs are taken into consideration, the general public will realize that, Econet Wireless Zimbabwe is providing a service that can’t be expected from an organization overburdened with the expenses that it has in a challenging economic environment such as Zimbabwe.
Make no mistake, Econet has many constituents to please, for instance, banks, shareholders looking for a golden payday, employees, customers etc., and unfortunately it doesn’t have the cushion of taxpayers’ money to rely on like its two rivals, who can afford to persist being loss-making, because it’s safe to assume that government will always come to their rescue in times of financial distress. For one, Econet has to improve operational efficiency as it has financial obligations to honour, and the minister duly confirmed that in one of his statements, “I would also like to advise that instead of issuing statements attacking Government and my person, the company must take responsibility for its active role in seeking to draw more revenue from its subscribers, details of which are now public knowledge. It is also on record that Econet top management have been to my office, not only once, pleading that I do not approve proposals to decrease tariffs and that they be increased instead because their business was suffering and on the verge of being called out by European Banks from which they have received loans”.
Econet raises capital from external sources, and that money doesn’t come cheap because of interest charges, placing it at a big disadvantage in comparison to its rivals who benefit from the benevolence of the government. Government can always bail-out Telecel and NetOne if their financial positions become untenable, and these funds don’t attract any significant interest charges if any.
Meanwhile, an awkward tragedy is that the company is owed significant interconnection fees by its rivals (basically government). An interconnection fee is the money paid by network operators to each other to allow call termination across networks. Consider for example, Econet is owed substantial amounts by government, and yet Zimra, the tax authority (essentially government) expects the company to make tax payments whenever they become due. Let’s take a moment, and be grateful that Econet despite this awkward set of circumstances continues to operate and doesn’t throw in the towel. Maybe it should do some financial engineering now and then, and negotiate to offset its tax liabilities with what it is owed.
The centerpiece of Econet’s woes is a regulatory framework and environment that is a poisoned chalice. At no point was this best illustrated than the floor pricing debacle caused by a directive from Potraz, the country’s telecoms regulator, which led to the war of words between the minister and Econet mentioned earlier. Shortly after the directive had been issued, Econet was the first and only mobile operator to effect data and voice tariff hikes. Still until now, i find it difficult not to believe that the company was set-up by the ministry, regulator, and its rivals to appear as a greedy corporation. Truthfully, how will anyone ever explain the inaction of its rivals, and the silence of the regulator with regards to their behaviour.
The tariff hikes were not by accident, Econet was simply following a directive, and therefore the price hikes were legal and above board. Its rivals chose to defy the directive, rendering their actions illegal, and yet Econet is the bad corporate in all this, truly this business environment isn’t fair. Sure, the tariff hikes were exorbitant, the merits or demerits of these are for another day, and nonetheless the issue at hand was about its legality.
In effect, the reality is that NetOne and Telecel defied a directive from the regulator, yet it is Econet that had a battered image from this debacle, as a greedy corporate whose sole focus is milking an already financially overburdened consumer. With a complete reversal of the behaviours, it would have been interesting to see the behaviour of the government, because I don’t believe this environment will ever treat all the MNOs equally, as predictably some animals are more equal than others.
It’s easy to see that Econet is pathetic at public relations. Despite all its poor public relations efforts in correctly articulating their predicament to their subscribers, Econet are actually operating in an environment set-up for their demise. This fact is insufficiently recognized by its subscribers. And having sympathized with the company with regards to its operating environment, however some of its inefficiencies to its subscribers regarding service provision are elementary. It will never be easy to ascertain which business books exactly they read within the company, nevertheless as Van Lee Chigwada stated, “with great power comes even greater responsibility”, and as the biggest MNO in the country, value provision should be the ultimate purpose on which the company is built on.
Econet should be wary of being overly obsessed with market share as that has become ancient history as a business matrix, as purpose share provides a new dynamic to business. Market share is an old-fashioned way of looking at business, as Kodak had a big market share in a declining market and its management was too ignorant to this new reality. Anyone within Kodak who was constantly looking at the market share figures would pump their chests in the belief that the company was performing well, whilst oblivious to the reality that the smartphone was already feasting on their share of the pie, without being noticed. Nokia, anyone care to remember them, are another example of having useless market share, in a market that is seizing to exist.
Econet management should remember that overpricing a pathetic product or service doesn’t improve the topline or the bottom-line. People now have choice. In as much as its rivals are pathetic at service provision, it should really place itself above the crowd. There is no greatness being among the crowd. It is high time the company starts consolidating its current products and services, whilst improving them. Nowadays, customers understand value. The best word to describe Econet is mediocre, both from a pricing perspective and value provision. Whoever advised the company that it is very profitable and sustainable in the long-term, to overprice mediocrity deserves to be thrown into the middle of an ocean.
Just as your business model has evolved from relying heavily on revenues from sim card sales, voice calls and text messages, to having to rely on data usage etc., and so will your whole business be disrupted by some kid behind a laptop or personal computer sitting somewhere, currently figuring out how to make communication and internet accessibility on mobile devices a valuable, pleasurable and cost-effective experience. It is pertinent for the company not to under estimate the extent customers cherish a good experience, of course, currently the assumption is that customer experience doesn’t really matter because the economic environment is in turmoil and customers will just embrace any product or service that comes their way. This is just a misguided assumption of reality, as examples of customers jumping ship once a new and better product or service is introduced onto the market are too many to mention.
The company has become so opportunistic such that any given opportunity of a crisis, it therefore assumes is another chance to hike transaction charges to increase its own profitability at the expense of the customer. Understandably, the primary purpose for being in business for investors is to create wealth for themselves, however there is also need to be vigilant whilst creating shareholder value not to alienate the customer base by being too greedy. The customer is king we are always conveniently told, and the survival of business relies on the support of its customers. Nonetheless, Econet doesn’t really care about its customers, because how would you explain the international charges for its EcoCash platform. Doesn’t this border on extortion of the customer’s hard earned money? EcoCash should have become a bank on your mobile device; however that purpose has been lost in the midst of the prevailing greed. Whilst Mpesa is evolving to processing cross-platform transactions, EcoCash is just another mobile money transfer platform.
In conclusion, customer loyalty is only accorded to products or services that are valuable and provide the best customer experience. Being one of the biggest on the local bourse doesn’t guarantee your future, as these are volatile and turbulent times which only reward those who seek to provide value as their purpose for being in business. Maybe the best chance for Econet to become a great company is to disrupt itself, and desist from overplaying the victim card as it has grown to command about three quarters of mobile subscribers, and is now less vulnerable to not so well thought out government policies that could disrupt its entire operations, since the government itself has too much skin in the game, being the proud owners of two hopeless MNOs. Econet has built a wall between them and their subscribers, and at the present moment as much as the subscribers are trying to climb over the wall to reach the company, their main obstacle is that the height of the wall is continuously being built upwards. Knowingly or unknowingly, it is now them versus their subscribers, in the long-term it leaves them very vulnerable.
Nathaniel Mafemba is an entrepreneur, with a keen interest in technology and building brands. Contact him on (+263) 779 599967/ email@example.com /Twitter:@Natemafe @wadekarta