Zimbabwe yet to adopt compulsory infrastructure sharing as model gets pushback from Econet

Posted by Read 6 Comments

In late 2016 the government of Zimbabwe, through the Ministry of ICT passed a new regulation  – Statutory Instrument 137 of 2016  introducing compulsory infrastructure sharing for the country’s telecoms operators.

The regulation came after years of discussions around the issue which had been accelerated by an ultimatum set by the Minister of ICT, Supa Mandiwanzira, forcing all operators to come up with a framework for shared infrastructure.

Months after the Statutory Instrument was passed the forced infrastructure sharing arrangement is yet to be put into effect.

A recent report in the Herald quotes Dr Machengete – the Director General of the telecoms regulator POTRAZ – as having said that compulsory sharing hasn’t started yet.

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According to Machengete, a few weeks ago Econet Wireless, the country’s largest mobile operator submitted a case arguing against this and POTRAZ is still reviewing this submission.

Econet’s objections

Econet’s arguments against compulsory infrastructure sharing stem from the fact that as a private telecoms operator it has invested over US$1 billion into its infrastructure to develop the network with the widest coverage.

This has been enabled mostly by leveraged finance (borrowed money) secured under some tough conditions and was all achieved in an environment where its competitors didn’t follow the same route. Econet has even accused the other operators of spending money on cars and offices instead of their networks instead.

Econet is also sore about the fact that years ago it approached State-owned operators and asked to share infrastructure. The request wasn’t honoured and Econet had to make its own arrangments.

With the widest coverage, Econet currently enjoys an edge in the industry because of this investment and a shared infrastructure model dismisses all of this.

The government’s predicament – Levelling the playing field & making data cheaper

To get to the point where compulsory sharing is actually a thing a number of strong points have been raised not only by the government but by the other telecoms operators that naturally benefit from the arrangement.

Shared infrastructure limits the capital expenditure that every other operator has to incur to grow its coverage. This means, in theory, that money saved can be used to extend coverage into other untouched areas that don’t have coverage.

According to estimates from a study carried put by POTRAZ, these can be capital savings of up to 60% and operators’ costs are anticipated to be reduced by up to 30%. This could also be the starting point of tighter controls on data prices, something that dovetails into any #DataMustFall efforts, at least from the government’s end.

Since infrastructure rollout rides on imported hardware the country also saves on foreign currency, a phrase which has lately morphed into the Abracadabra that gets the Ministry of Finance and government to bulldoze any sort of resolution.

The government is pushing through infrastructure sharing, or rather, holding on to the resolution because of all these realities.

However, in efforts to maintain a semblance of a fair playing field Econet’s arguments have to be taken seriously. The State isn’t in a position to just force players to share when it doesn’t own the majority of the said infrastructure. Base stations aren’t land.

That same reality also highlights the after effects of the State’s lethargic approach to infrastructure investment when it had the chance to own a larger piece of something that delivers a utility.

The Government has to consider the impression of such actions on investor sentiment while carefully weighing the welcome contributions that Econet makes as the largest taxpayer – another price the State is paying for being a cash-strapped administration.

There’s no budging on the sharing…so perhaps the rules?

The likely outcome will be compulsory sharing that’s laced with a lot of provisions that try, in several ways to maintain the value of Econet’s investment.

Since the initial arrangement was to have all operators pays leasing fees to the operator they borrow infrastructure from, the haggling points will be how much is paid and seeing that Econet is dealing with mostly State-owned players anyway – HOW this is paid.

Plans like tax breaks (theoretically more than anything else) and import rebates come into mind.

If that is what’s on the table then it’s better for Econet to argue now than to have the government dismiss the finance and accounting logic behind any payment plans that they might agree on.

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6 Comments

  1. averva says:

    Avada Kedavra

  2. Macd Chip says:

    Stil thinking about it

  3. Macd Chip says:

    We are still 100years behind to understand how ripple effects works in business. Everyday the government is persecuting Econet and even arming itself(by “buying” Telecel) to punish Econet. There were two Telcos who were not forwading cross charges, ie, TelOne and NetOne, now government is adding another one which very soon will stop paying cross charges to econet.

    If these gvt owned companies were bringing any benefit to the public, then you could give them benefit of doubt. But they are actually bringing more debt and poverty to the people because of poor decision and corruption.

    The users are being charged normal call charges, which include cross connect charges which is suppose to be settled, TelOne, NetOne and soon Telecel are happy to collect that money, then convert it to personal use through shaddy deals and companies designed to milk the system.
    Then cross call charges tget converted to gvt debt which is taken by the government and passed back to the poor public.

    Ministers and their permanent secretaries are busy asset stripping telcos, now there is nothing worth talking about left, they want to asset strip Econet through the backdoor!!

    We hear then that gvt is working flat out blar blar to bring investment into the country. Who in his right mind can invest in a country which is failing to protect its own citizen business?

    Its across the whole business platform: today people are given land, tomorrow someone comes and take again because they are now close to the new minister.
    Thats the same with housing, projects etc.

    We need to put our house in order first before we go outside and claim we are business ready country.

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  5. Chris Mberi says:

    I am for infrastructure sharing because it could benefit me as a business to become a virtual MNO. It is however worrying that the biggest infrastructure vendor, being Econet, might end up suffering serious financial loss as major customers, netone and telecel fail to pay as they’ve always done. It would be very hard to find a recourse in this case as licenses have already been paid and there’s nothing to offset the debt with. In short, that state owned entities don’t pay is what stops this from working

  6. Rookie says:

    Yaa!!! This is very interesting. Saka when NetOne was still enjoying the widest coverage yakatomboranbawo ne infrastructure? Who benefited from them having the widest coverage? Calling was expensive, SIM cards were for the rich only.

    Now someone is ahead the same people say you have to share with NetOne whom they were protecting just a few years ago. What hypocrisy!! Though there are benefits of sharing, one tends to wonder kuti where has Potraz built the USF towers.

    Techzim keep up the good work. Can you help us find out how much has been contributed to USF so far, how many towers have been built and what the challenges have been. Honestly we can’t have Operators having issues with going into new areas when we are sitting on a lot of money that is now being diverted for other use.

    Keep exposing what’s happening without fear.

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