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Econet remains mum on Infrastructure Sharing, but here’s what it could be planning

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Econet

We recently mentioned how two of the largest telecoms operators, Econet and Liquid Telecom walked out of the Infrastructure Sharing regulations formulation at a time when the final document was near complete.

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We reached out for an explanation from Econet to better understand their move but unfortunately, the operator has refused to comment about its intentions. Which leaves us even more curious as to what offensive it’s cooking up in Msasa.

Despite Econet’s behaviour, however, POTRAZ has indicated that the sharing process is continuing until its conclusion and there are slim chances of stopping the process being finalised into law. The final document will be submitted to the Ministry of ICT this coming Friday the 4th for adoption and drafting into law before the usual Gazetting.

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The ICT Minister seemed to indicate a tone that does not put Econet at the center of the Infrastructure Sharing debate by implying that the government has chosen and intends to set up a National Infrastructure Company of its own in which state parastatals will participate and the private sector may apply for inclusion if they are interested.

This sounded like a veiled tit-for-tat at Econet as the government through its various arms can offer more contemporary services than Econet if we are to consider the Trippe play capacity of TelOne, Transmedia and NetOne with digitisation.

What is Econet’s end game?

The sharing of Infrastructure has been a contentious issue that goes to the very core of Econet’s operations and survival as a business. In that regard, it cannot just huff it away in childish rage at this crucial stage and simply let the government, and other players have their way unchallenged.

This is not the Econet that has the guts to disconnect Telecel and NetOne as penalty for interconnection arrears, the same Econet that for a period defied government directive to slash tariffs, the same company that raided a whole publication… the bravado shows are many. The very makings of Econet are based on fighting ever since it had to go lengths to acquire its licence. It is not in its interests to just let such a crucial piece of legislation pass. So what are its options then?

1. Grandstanding

It is possible that this move was just calculated to give Econet and its shareholders much grandeur and create drama considering that by all intents and purposes, it opposed the idea from day one. Otherwise, it makes no sense that it would ditch the process it had invested in for so long at the last minute. It has as good as participated, except for not appearing for the signing ceremony. This show of defiance would please the sympathetic stakeholders and direct shareholders who fought tooth and nail in their corner.

2. Legal Challenge

Econet knows exactly what is in the regulations and how it arrived at the final document. It knows the legal environment that culminated in the regulations. It is possible that it has all the arsenal it needs to lodge a legal challenge against the whole process. After all, it has at its disposal the likes of Beatrice Mtetwa and Tawanda Nyambirai, some of the most prominent names in the legal fraternity. If anyone could challenge this process legally, it is Econet as it is not short of options.

But legally, is there really a channel? So far the chair of the legal committee in the discussions Ms Tsitsi Mariwo indicates that collectively the subcommittee explored all avenues according to their understanding of the law and they could not see a loophole. But then again if Econet had its legal brains in there, they would not have come out to correct an error at law that they could use in the future. Legally, it has the right to challenge the process or the outcome. Whether or not it will be successful is another discussion best left to lawyers and politicians.

3. Prohibitive pricing

Should the regulations come into force as law, Econet will still have to comply with them. The process of sharing infrastructure, however, requires that the seeker approaches the owner and they agree on a justified price for renting their infrastructure and the two have to agree on a fair price. Econet can still justify a prohibitive rental against the other parties in order to recoup the market capital “lost”.

However, the new regulations also contain an escalation process where it says when the two fail to agree the authority can come in. If the regulator at some point decided to slash the tariffs on voice despite the operators having “justified” 25 cents per minute, what’s to stop it from determining the “correct” rentals in case of an argument. In fact, this could be a good enough reason for Econet to have walked out doubting the autonomy of negotiating rentals with a state-owned enterprise.

4. Its own Infrastructure Company

One reason Econet refuses to share is the exposure of interconnection arrears on one hand and rental defaults on the other. It has previously played judge and jury disconnecting both Telecel and NetOne in different incidences. Econet Wireless Zimbabwe may consider transferring its infrastructure to the larger Econet Wireless Group which then comes in with an independent Infrastructure Company, say Econet Infrastructure Company, EIC.

It will then lease their infrastructure at the same exorbitant rates to EWZ and Telone alike justified by the direct cost of sourcing capital for expansion from foreign investment, in the same manner that Liquid Telecom “charges” Econet and ZOL for fibre capacity.

The same manner that the state offers TelOne / NetOne privileges, the Infrastructure Company can also offer EWZ the same but still remain divorced (remember Tengai / Econet zero rating). That way it can separate and spread risk from both rentals and interconnection defaults and that way, the Infrastructure Company can simply disconnect defaulters without playing both judge and advocate.

Some have debated the notion that Econet could throttle competitor traffic when sharing, but then the new regulations specifically stipulate that the QoS(Quality of Service) must remain the same for the owner and seeker. Whatever move Econet decides to implement, it is agreeable that it has succeeded in causing reasonable anxiety in the telecoms sector.


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5 thoughts on “Econet remains mum on Infrastructure Sharing, but here’s what it could be planning

  1. Who needs Netone, Tulane and Telecel put together when you have continental giants like MTN!
    Create another parastatal for infrastructure sharing! These guys must be brewing their own tototo or mixing their own poisonous dope.
    Stay out of this circus Econet!

  2. If infrastructure sharing is cost effective as being said, why cant just leave Econet out of it and then let this all other operators share their own infrastructure then force Econet out of business through predatory pricing as a result of lower operating costs. Because now it seems like if there is no Econet there is no infrastructure to share, jus saying

    1. The way I see it, they are going to implement sharing with or without Econet but legally Econet is required to. Being are large player it is necessary to get their input when coming up with legislation, as with any industry. So yes the government can go its way but if ever there is a need in the future for interfacing there needs to be rules of engagement

  3. Option 4
    Transfer of infrastructure assets to EWG would attract significant transaction costs and may not be a plain sail chiefly because they are different companies and EWZ is a public company.
    1) EWZ is a ZSE listed company which is required by the listing rules to follow certain procedures chief among them being an EGM to approve the disposal. Strive & his companies will not be able to vote on that one. The call will rest with the minorities who may view the transaction as a bonus transfer of wealth to Strive. EWZ minorities have a memory of an unfair transaction that increased Strive’s holding in EWZ and diluted everyone else.
    2) taxation charges (such as VAT and/or CGT) will be attracted by transfer of assets from EWZ to EWG which could easily run into tens of millions.
    3) Financial, legal and other advisory fees may chew up to 5-10% of value of infrastructure equipment going by market rates.

    The fourth option is a non-starter for me. Maybe option 2 since EWZ legal team always has something up their sleeves.

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