HomeOpinion & AnalysisTelcom companies abuse monopoly

Telcom companies abuse monopoly

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ZIMBABWE like other emerging economies in Africa has gradually emerged from the shadows in terms of development of the telecommunications sector.

There has been rapid growth in tele-density, Internet connectivity and subscription to cellular communication service providers. In Zimbabwe there are three dominant cellular communication players that offer telephony and data services.

Africom and Powertel offer cellular phone communication via Internet platforms using Voice over Internet Protocol (VOIP). VOIP has not made significant strides in penetrating large swaths of the cell-phone communication industry owing to a number of factors.

The most important determinant which has limited the growth of communication by VOIP is lack of consistency in internet service provision by aforementioned dominant Internet service providers. Whenever Internet is provided, it is at times so slow that it does not facilitate serious communication.

The other point is that Internet service provision is mostly limited to urban areas and in those urban areas it is limited to certain suburbs or locations of the town or the city. This therefore means that service providers need to do a serious Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis or Political, Economic, Social and Technological (PEST) analysis to diagnose their strengths, opportunities and weaknesses.

The dominant firms in the provision of cellular services in Zimbabwe are Enhanced Communications Network (Econet), NetOne and Telecel. Apparently the cellular firm market structure with three players is an oligopoly (a Greek word which means competition among few firms). Market watchers observe that Econet has a market share in excess of 70% with a subscriber base of around eight million (never mind the fact that the same person may have three or four Econet lines).

This implies that in terms of microeconomic analysis using for instance the Herfindahl index or Lerner index of market power, Econet is a virtual monopoly.

Monopoly power acquired by a firm legitimately through business activities has both advantages and disadvantages for consumers. The obvious merit of monopoly power is that a firm such as Econet is able to acquire the latest plant and equipment from developed countries at discount or concessionary rates.

This facilitates rapid expansion of the company which enables it to better serve its customers in terms of increased connectivity throughout the economy. A dynamic fall in long term average costs of production and distribution experienced by Econet since it became licenced by government has enabled the company to diversify its product or service range from its core business of cellular communications to the provision of solar energy based products, phones and accessories as well as electronic banking services.

This implies that Econet is now by and large a conglomerate, that is, a highly diversified business offering many positives for the discerning investor who wants to maximize the returns of his or her investment portfolio.

NetOne has by and large followed the footsteps of Econet in terms of market penetration and provision of services underpinned by fast-paced innovation. It pioneered in enabling rural folks to be connected to the outside world through cellphones.

NetOne also pioneered in empowering its customers through the one hour call discount service during the day for juicing by $1 and the unlimited calling service for recharging by $1 at night. Of course Econet responded to this by intensifying its Buddie Zone and free minutes products. As we know in economics, there is nothing which is free in this world. When companies say something is free or is offered at a discount, they actually imply that they have shifted the costs elsewhere either explicitly or implicitly.

Those costs are eventually borne by someone in the economy, that is, they are either internalised or externalised.

This article argues that the rapid growth in subscription, product diversification by the main cellular companies in Zimbabwe and so-called free minutes or zones or discounts have come at a heavy cost to customers.

The writer of this article has for instance called Econet numbers in Bulawayo conducting market research, seeking help in connection with products on offer or some problem he has encountered in using his buddie line and has frequently failed to find help.

The landline phone rings incessantly without anyone picking. One tries different numbers the story remains the same, no response to telephone calls. Maybe the company has found comfort in large market share or market dominance.

It is really irritating to a customer to phone a company and get no response during normal working hours. This writer checked over the internet and other sources and discovered that there are many disgruntled customers of Econet and to a smaller extent NetOne has disgruntled customers as well.

It is high time the chief executive officers and senior managers of these firms know that at the grassroots the state of their businesses is not as glowing as presented in highly abridged financial statements that have a paucity of details when it comes to deep market analysis.

The greatest strength of any successful business is a vanguard of loyal customers. The most potent threat faced by any successful business is a growing population of disgruntled and dissatisfied customers who are taken for granted by the firm.

There are few customers or people who complain about the Telecel service most probably because the company has chosen to concentrate on a small niche of the market and thus enhance service provision and service quality. Powertel is good in responding to customer queries promptly.

In situations where the nature of the queries need mechanical or engineering solutions Powertel informs its customers the likely duration of a problem before it is fully addressed by technicians.

The foregoing analysis imply that there is great need for all telecommunications firms to engage in serious soul-searching (that is, if they have any soul) to improve service provision and service quality. A customer taken for granted metamorphoses from being an “apostle” of the firm to being a “terrorist”.

A terrorist customer works tirelessly to highlight the defects in a certain service or products and this discourages potential customers from adopting a product or service. We have not reached that stage as an economy. There is still room for the analysed firms to learn and grow.

It is only an unwise person who continuously learns the same lesson by repeatedly making the same mistakes. The best is to learn from other people’s mistakes. To be forewarned is to be fore-armed. Twenty years ago who would have thought that companies could be formed in the telecommunications industry which would unseat PTC in terms of both market share and asset capitalisation.

In a fast-paced technology savvy world today’s business giants may be tomorrow’s business dinosaurs.

 Ian Ndlovu is an economics lecturer at the National University of Science and Technology. His research interests cover business, development, economic and e-commerce issues. He writes in his personal capacity.

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