Netone eyes 8m subscribers

HARARE - State-run mobile cellular firm, NetOne, is preparing a $219m expansion war chest as it aims to reclaim pole position lost to rivals after experiencing capitalisation problems.

Managing director, Reward Kangai, speaks to senior assistant editor Guthrie Munyuki and below are the excerpts of the interview.

Q: NetOne had a head start in the cellular market upon its launch in 1996 but has slid to become tail ender; what are the reasons for that?

A: I would say that the launch should actually have happened 18 months earlier than what actually happened.

It was set up during the Post and Telecommunications Corporation (PTC) era and we were forced to go through the government tender board.

The whole process was delayed by as long as 18 months.

There were attempts to change the tender award and so forth.

It was a protracted process which took 18 months. We eventually started our operations in September 1996.

But I would say those challenges that NetOne faced right from the beginning are still there.

The business itself is very highly capital intensive. Just to set up one base station you need something like $240 000, starting from scratch.

When NetOne started the funding was through a few loans that we obtained but to only set up a network with a capacity of 40 000 subscribers and 70 base stations.

Today, we have a capacity of 4 million subscribers that is the installed capacity.

And we also have something like 660 base stations installed across the whole country.

Since the last loan was disbursed in 1999 we only got a loan in 2011.

So in between 1999 and 2011, NetOne did not have access to foreign loans because of the situation in Zimbabwe, primarily sanctions, whereas our competitors had access to foreign loans.

And that really made a difference. I think getting the network early is all too important in this industry.

It is true to say that it is the early bird that gets the worm. The same thing applies to the mobile industry.

If you come from Muzarabani for instance and NetOne establishes a base station it means that you will be the one to get most of the customers. When others come later on, they will just really be struggling to get customers.

That explains the trend in terms of the market share.

We have not been able to get external financing predominantly due to the fact that our shareholder is also constrained in terms of financial resources and in addition to that, the effect of sanctions.

We actually signed a contract for the next expansion in the year 2000 with Siemens which won that tender.

We signed that contract with Siemens for $50 million but we could not get the funding.

That was the time sanctions started. That explains why. The network has largely been built by collections from our subscribers to expand the network under very difficult circumstances.

Q: What are the steps that you have taken to grow the company?

A: First of all I must say the major shift came about when government implemented the Look-East policy because most of the Western governments were not providing financial support to NetOne.

Even Pan African institutions were all shying away from NetOne.

But come the Look-East policy and also the rapid growth of Chinese equipment suppliers, we turned to China and we got a loan of $45 million. The equipment was commissioned in December 2011 by his Excellency (President Robert Mugabe).

We deployed that equipment; it made a major transformation in NetOne. Right now our minister is spearheading efforts for a second loan to the tune of $219 million which will really transform the network. We have made an application for that loan.

The initial amount (of that loan) was supposed to have been $298 million but there were various misrepresentations that were put to the ministry of Finance resulting in significant reduction of the key components on the network.

We were supposed to put 350 Greenfield base stations but that number was reduced by half, to 175. But should this project be implemented, and we are very optimistic, it is going to transform the telecommunications landscape in Zimbabwe.

It will propel NetOne to pole position.

We are putting all efforts towards getting this project. There have been efforts to scuttle that particular project because our detractors realise that this project is going to make a major impact.

Q: What is your current subscriber base?

A: At the close of last year we were at about 2,4 million subscribers. That’s quite a significant growth given the delays in the capitalisation of NetOne.

We are going to get the total capacity to 8 million subscribers (if NetOne gets the $219 million loan). And we are going to provide coverage to virtually everywhere in Zimbabwe.

We will also provide Internet to the rural areas and we are also into urban and high traffic density areas. We are going to provide Fourth Generation (4G), very high speed in terms of internet access.

Q: How much are you owed by subscribers?

A: The amount owed is about $28 million. A lot of companies, at the turn of the multi currency (regime), ran huge bills and dumped the NetOne sim card without paying us and they went and got two thirds sim cards from the competition. We are trying to recover that money. We are still owed $28 million.

The key aspect of that is as far as Zimra is concerned, because we have sent invoices for the tax obligation; we are now using good money to cover that gap. Again there is an obligation to Potraz because in terms of the licensing of NetOne we have to pay annual licence fees to Potraz based on gross revenue.

So the moment you send an invoice there is an obligation. We are having to pay heavily because of that uncollected debt.

All these aspects have been slowing down (the network) and given the fact that NetOne has to finance its capital investments from operations, it has really been quite a big challenge for the company.

Q: From this, how much is owed by ministers and government?

A: It’s government in general, even Cabinet ministers, it is government which pays.

I would not say it’s ministers. No. It’s the whole government but we understand their challenges. Government owes us about $10 million. We also have other parastatals.

The Reserve Bank of Zimbabwe is also one of those who owe NetOne.

They never paid us from the time we went to the multi currency system. To make matters worse we had some amount of $800 000 with Barclays Bank and its money Barclays Bank claimed was liquidated by the Reserve Bank.

That money is still not recovered. It is not part of the debt.

It’s money that we collected (from our customers) and it’s the money that was liquidated by the Reserve Bank. We have appealed to our ministry to assist with the recovery of that amount.

We are also trying to clear some of the loans we got at the set up of NetOne.

We have negotiated with some of lenders for the removal of interest and penalties but on the basis that we make one bullet payment. So we are trying to collect these monies (owed) so that we can clear that. And we will be saving from one of these lenders as much as $9 million.

It is obviously very important for us to clear that.

Q: What is NetOne’s response to EcoCash and Telecash?

A: We have One Wallet and it is superior to theirs, I can tell you that. 

It’s superior in three aspects. One Wallet is realised on the sim card.

You need to have a special 128K sim card which has got bigger memory.

And what it does is that it puts all your instructions, the menu, on the sim card. So it’s sim-driven.

When you get into One Wallet on your phone, it’s like you have entered into a restaurant and your menu is given to you.

It’s very easy to use.

The second aspect is that because it is on the sim card, there will be security features, encryption on the sim card. The only thing you need to remember is your PIN number.

There is no way that a hacker can be able to intercept your transaction outside of your sim card.

The third aspect is because we have provided a bigger memory sim card, we have a facility — phonebook back up memory — automatically throws your contacts on the network.

When you lose your sim card and phone and you get a replacement, you simply download your contacts from the network. With One Wallet everything is secure; your hard-earned cash is secure.

Comments (6)

Which 8 million fools will take up that dead network.

jessie - 18 February 2014

Ya I agree the network have several problems along the way, but Netone is good, things will come right keep trying guys lets learn to be patient zimbos.

Tk - 18 February 2014

The moment you try to steal customers from Econet, it'll just through some freebies like unlimited internet, and you are stuck!

Mukanya - 18 February 2014

yu have 660 basestations across the country, econet has more than those in harare alone but they still need more to serve their 8million. muchiri nerwendo VaKangai

gumbura - 18 February 2014

Check their salaries first, you will see if they cede 10% of it they will build more base stations. 7 Million Dembare supporters have also boycotted your services.

Maita Manyuka - 19 February 2014

Kurota kwanaKangai pachiZanu hakuperi. You always claim sanctions even when refering to Pan African institiutes vasina any sanctions against. Just try paying back zvikwereti as per agreement and see if you cant get loans! Vanhu veParastatal makawana pekuhwanda napo muchingoba zvenyu...kungodai..ah sanctions this..ah sanctions that, when you are not performing! MURI KUBA CHETE APA!

Tongogara - 19 February 2014

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