10:44 am
22 October 2016

Zim govt in overdrive efforts to seize Econet’s telecoms infrastructure

AN ULTIMATUM issued to telecom operators in Zimbabwe to adopt an infrastructure sharing agreement hangs in the balance after the country’s largest mobile operator, Econet Wireless, pulled out of the talks last month.

Information & communication technology (ICT) minister Supa Mandiwanzira issued the 90-day ultimatum in July, seeking to tighten government’s grip on the telecom sector. The deadline is the end of October.

This is not the first time Zimbabwe has turned to issuing ultimatums to the private sector. It has issued similar threats in the past over compliance with the country’s 51% indigenisation law.

The threats leave potential foreign investors sitting on the fence, wary of investing into the country.

Econet, founded by telecom magnate Strive Masiyiwa, enjoys a 70% market share in the industry, which is the third largest contributor to Zimbabwe’s GDP.

Zimbabwe has three mobile operators: Econet; the state-owned NetOne; and Telecel, owned by global operator VimpelCom.

Until now, Zimbabwe’s telecom operators have been individually investing in and owning their infrastructure, which has given established players a competitive advantage. Industry observers have intimated that Econet was likely to be the biggest loser under the arrangement of infrastructure sharing, as for years it had single-handedly rolled out the largest infrastructure expansion projects across Zimbabwe.

Investments made by Econet into infrastructure expansion in the past year are estimated to be worth over US$125m.

Econet says the infrastructure sharing talks are not feasible: “It is a disguised, unconstitutional form of compulsory acquisition of our infrastructure.”

The Posts & Telecommunications Regulatory Authority of Zimbabwe (Potraz) is spearheading the infrastructure talks among the telecom operators. The outcome was supposed to be a memorandum of understanding signed by the operators and later presented to government for adoption as policy.

Mandiwanzira this week was evasive on what government would do since Econet had pulled out of the talks. “Talk to Potraz; I’m sure they are the best to comment on the issue.”

He is on record as saying the government has its eyes fixed on the telecom sector: “All our lives are now dependent on telecommunications infrastructure, such as our health, e-government and education. Therefore it is so important that a neutral player like government is at the centre of infrastructure in telecommunications to ensure that it is not abused by individuals.”

This push to gain greater control of the sector is already under way.

Last month, state-owned ICT firm Zarnet bought Portnet, a software and network systems company, fuelling speculation about the state’s drive to increase its grip.

Prior to the acquisition, the third largest mobile operator, Telecel, had a run-in with authorities in April, presumably over its failure to adhere to the 51% indigenisation law and to pay for its operating licence. The loopholes were used as grounds for the cancellation of its operating licence by Mandiwanzira.

The licence was restored only after the company approached the courts, where it appealed against the cancellation.

Telecel’s parent company, VimpelCom, has publicly indicated that it will not let go of its equity stake for free, amid indications that the government, through Zarnet, is eyeing its 60% stake in the mobile operator.

Last month, Anton Kudryasho, VimpelCom chief business development and portfolio officer, said that not only had its operations suffered as a result of government interference, but it would not give away its stake. “We have to receive proof that government has funding for this kind of transaction. We will continue to keep our options open.”

Econet is likely to stand its ground and refuse to sign up to a deal that disadvantages it in the long run.

An executive at Econet who asked to speak off the record says: “The scheme appears designed to give NetOne access to Econet’s infrastructure to accommodate equipment it got from China.”

Relations between Econet and NetOne have been frosty. Econet alleges that it is owed $75m in interconnection fees accrued since 2009 by NetOne.

Government issued treasury bills to pay off the debt. This has been questioned by Econet, given that the nature of the debt is commercial and treasury bills are not cash.