‘NetOne geared to go’

In the past few years, State-owned mobile network operator, NetOne, has been on a transition journey that should see the telecoms firm recovering from inefficiencies and legacy debts to a profitable firm. Management is upbeat of its prospects, especially with mobile money platform, OneMoney.

Already figures from the regulator, Postal and Telecommunications Regulatory Authority’s (Potraz) 2019 third quarter sector performance report show that OneMoney recorded the highest growth in active mobile money subscriptions registering a 27,8 percent growth to 428 529 compared to 335 132 subscribers in the previous quarter.

Our Business Reporter Enacy Mapakame (EM) met with NetOne chief executive officer Lazarus Muchenje (LM) and discussed a wide range of issues. Below are some excerpts of the conversation.

EM: The 2019 third quarter performance report shows you are gaining traction in terms of subscriber base, what are you doing to maintain that growth trajectory and defend your market share?

LM: First of all, we have five operating regions across the country, we call them zones that are managed by regional managers. Within each zone, they are doing a lot of activations within that localised market. So for us, I think that has really been the key to our success, where we’re actually taking our activations at zonal and at community level as opposed to try and push those activations from head office.

Within the zone, they actually have little sub groups of captains and brand ambassadors who know exactly what that community requires, so that we provide the market with the exact product and service they require. We are taking product to the people.

The second one has been the franchise model where we’ve also looked at capacitating the local shops, rural shops and growth points. This helps subscribers to access our products and services within micro communities as well. Those who want to cross over to NetOne can do so with ease and without going to town to a NetOne shop. As of now, we now have 1 500 franchise shops, from 34 shops and this has paid dividends as we have seen immense growth with subscribers growing by over 700 000.

EM: What is your view on the current tariffs, how sustainable are they to your business?

LM: The nature of our industry is restrictive, it is a highly regulated sector but we try to lobby the regulator to also allow us for an upward review.  But of course, I would like to thank the regulator for allowing us a few adjustments last year, but when you look at the cost structure, in relation to the tariff increase, it’s not synonymous, it’s not aligned. The costs are rising at a faster rate.

EM: So when proposing new tariffs, what type of costs do you consider covering, what influences the figures you come up with?

LM: Whatever tariff increase we come up with, we don’t exceed the ceiling from the regulator. We are always in discussions, lobbying for reviews but we also need to strike a balance with the consumer. The consumer wants to communicate but their salaries and income levels are not going up as fast as the rate at which the cost of living is going up. So when coming up with the figures, we consider if the consumer will have that kind of money say to make a call or buy data. The regulator also does independent assessments and looks at the application with a holistic approach, considering all these factors.

The same applies to us as operators, the costs of doing business is increasing at a faster rate.

EM: What are the main cost drivers in your business?

LM: For us the major cost drivers are to operate the network. There are very key things that have to be there no matter what. The first one is power supply, we need to be able to connect either on the national grid or generator. And with the current power situation within the country, we now have to be on generator most of the time which is costly. Most of our base stations have to go for 18 hours on generator, long back it used to be vice versa, more time on national grid and only a few hours on generator. Now imagine we have to deal with erratic power supplies and then we also have erratic fuel supplies to run those generators.

The second cost driver is infrastructure, It’s a highly capital intensive sector. There is nothing that is cheap. One base station can cost over US$250 000 in terms of the full equipment and installation. Then recently we have also been hit by theft and vandalism at our base stations.

Thieves take for instance solar batteries for resale and some of the perpetrators have been caught. So there is a lot to look at, then other factors like administration costs.

EM: Seeing that there may be no quick solution to power solutions, what is your way forward?

LM: We are now looking into other alternative energy sources. We heavily invested in generators but given the fuel situation in the country, we are also looking at a more sustainable model like renewable energy options.

EM: Then businesses are battling foreign currency shortages. How are you managing?

LM: Indeed, it’s an issue and we are looking at ways of improving foreign currency inflows. We recently created a bureau de change and people come in to buy and sell foreign currency. We have also opened shops in strategic towns, especially tourist areas like Victoria Falls and border towns where tourists make purchases using foreign currency. This is in addition to roaming services.

EM: Since the transition from One Wallet to OneMoney, how has the mobile money platform performed so far? How sustainable are the promotions you have been running since November last year?

LM: OneMoney has been growing. And we made the zero charges announcement, the growth just went up sharply. The first week after announcement our offices were congested because a lot of people were coming to register as agents within one week we registered over 10 000 agents on onto the OneMoney platform.

So you can imagine the traffic of people all these other towns under our zonal structures. Now we have over 50 000 peer-to-peer merchants (vendor/small transaction merchants) The p2p agents is like your vendors, your regular person.

People also have several options in terms of funding the OneMoney wallet, you can fund from any bank account through Zipit, which is a plus for us.

Companies can also pay salaries through OneMoney and now we have arrangements with some farmer organisations on the disbursements of funds for inputs, they can use our platform .

EM: You pioneered mobile money in Zimbabwe and overtaken by competition. What went wrong and do you think you are now in good stead to reclaim significant market share?

LM: Mobile money started off at a time when user adoption was a bit low, Zimbabwe has largely been a cash based economy although it grew later with the cash shortages. As alluded to earlier, we are on a path to building a world-class telecoms company. We are set on back to basics approach and one of the issues we are looking at is quality service and product.

We are already on a growth path with OneMoney with all the initiatives outlined and we are already making progress. The franchise model and the promotions are already bearing fruit for us, we are on the right path.

Additionally, with OneMoney, you can swipe using your debit card at any shop and you can also make payments using phone number, even if the phone is off which is a plus for us.

EM: NetOne is one of the companies earmarked for privatisation? What is the update on this? Have you identified a partner yet?

LM: Yes, and this is being done at shareholder level. All I can say now is there is an inter-ministerial committee in place and they are the ones working on this. But let me talk about what we are doing as an organisation in preparation for this transition. We have adopted a back to basics approach to strengthen the company, make it profitable and ensure it becomes a world class company. This is to make sure the potential partner finds the company with a sound balance sheet and attractive to do business with.

So one of the key aspects we are looking at is alignment of service with demand, like moving equipment from areas of low utilisation to areas of high utilisation. For instance, we have been redeploying say 4G network where it is needed more and this has already paid dividends. So here we have just used the already existing infrastructure to increase capacity utilisation. We are basically putting the right resources in the right places.

EM: NetOne is one of the beneficiaries of Chinese loans. Can you provide an update on this and the projects you are working on under this loan facility?

LM: This is for network expansion project which started a couple of years back. Phase one and two are completed the network expansion pro project couple of years ago, then the phase two was completed. So, the phase three is what is starting this year. The scoping and the feasibility studies in terms of where the sites will be located, is being finalised, then there will be a road map obviously, but the implementation of these resources will be starting this year.

This project will look at the existing infrastructure like what needs to be improved. There are some infrastructure that may require new radio equipment. Some effort will go towards infrastructure sharing with other telco partners. We have an agreement with Econet for 150 sites each. We also have an agreement with Telecel and TelOne. So we can look at those sites to say if we want to put NetOne network on a Telecel site, is it a 2G site only which may need equipment for 3G network. So we look at which areas need upgrading.  Then we also look at totally new sites because there are other areas that with no operators at and no network, they need to be catered for too.

EM: What is the future of voice calls and SMS in Zimbabwe?

LM: These still have space. Our statistics show that data is now at 50 percent on revenue contribution from about 30 percent. Voice is still quite substantive, there are a lot of people who are still on 2G and people still make normal phone calls. As long as the rate of smart phone penetration is low, then voice and SMS will have space. Companies such as banks do promotional SMS making announcements, for instance.