Poor business model costs NetOne millions •Suspended management blamed •Charges lower than competitors

Source: Poor business model costs NetOne millions •Suspended management blamed •Charges lower than competitors | The Herald May 21, 2016

Lloyd Gumbo Senior Reporter—
cellular network operator NetOne was making as little as 2,8 cents from voice calls per minute while its competitors earned a whopping 12 cents per minute because of a poor business model used by the parastatal’s suspended management, Parliamentarians heard yesterday. For that reason, NetOne incurred a loss of about $3 million when it earned about $120 million last year compared to its biggest competitor, Econet Wireless, that was making more than $700 million per year.

NetOne ran a dollar per day promotion that saw its subscribers enjoying an unlimited calls offer for on-net calls made during off-peak hours since 2012. This was revealed during a tour of NetOne by the Parliamentary Portfolio Committee on Youth, Indigenisation and Economic Empowerment chaired by Zanu-PF MP for Gokwe-Nembudziya, Cde Justice Mayor Wadyajena in Harare yesterday.

NetOne acting chief executive officer Mr Brian Mutandiro told the committee that the firm’s infrastructure was about 50 percent that of Econet, so all things being equal, the mobile operator should be making at least $350 million per year.

He said the previous management concentrated on rolling out infrastructure in various parts of the country, but without offering other services such as airtime in some areas.

Network operators largely make profit from airtime sales.

“As at the end of 2015, there was a loss in NetOne of about $3 million,” said Mr Mutandiro, who joined the firm in March this year.

“For us it’s a crime because our competitor Econet is making a lot of money. So there is no reason why NetOne cannot make money because we are all eating from the same pot. In 2014, half a billion was spent on airtime, so there is money. So it’s up to NetOne to aggressively pursue that,” he said.

“Currently, our turnover is around $120 million per year but the infrastructure that we have is about 50 percent that of Econet and Econet is turning over about $700 million per year, which means somewhere there is something we are not doing. That is where we are focusing right now.”

Mr Mutandiro said they had adopted a number of strategies that were expected to improve revenue inflows and see the firm declaring a dividend to Government this year. MPs asked why the company was making losses while its competitors were making profit.

“Like I shared with you that in 2015 we made a loss of $3 million. We are saying we rolled out a network but we did not follow up to create revenue streams to sit on that network,” he responded.

“I will give you an example where at times a base station is put in an area but there will be no airtime. So you are not monetising the investment. But our focus is very specific that we must operate profitably.

“They (previous management) were quite happy to say we have the widest network in the rural areas but what they were not saying is that ‘are we collecting revenue from there?’ So the focus that my team has is to go back to fulfil that demand so that the money comes back,” he said.

“We had that free airtime where people would spend the whole night just talking. Giving away the network but we said ‘no guys, we are in this to make money and we are not ashamed of it’. We will not make apologies to anybody.

“That is why we have started to change that facility because we have to make money. Our network used to be very congested and network resources were being used while we were not getting any revenue. That is why Econet is way ahead and able to launch new products,” said Mr Mutandiro.

He said they were now earning about 8 cents per minute while their biggest competitor, Econet, was still at 12 cents. Mr Mutandiro said they would work hard to gain market share through several innovations and providing quality service to subscribers.