By Bhekinkosi E Ngubeni
The Econet and Netone debacle continues over a relatively nominal fee of $20 million. Econet boasts of a $699.40 million in market capitalisation whilst Netone controls 17% of the communications market.
Between the two, they have found it necessary to put their differences ahead of customer satisfaction by opting to resolve their differences via the court of law. Econet, as it were, had effectively ceased facilitating cross network calls between themselves and Netone and only resumed service after judicial intervention.
Ultimately, it’s the end user, that is, businesses, public services and families who are forced to bear the brunt of network wars through not a fault of their own .Businesses were estimated to have lost thousands of dollars either through opportunity costs or business losses owing to the disruption of services.
A phone call could potentially secure a lucrative investment or sale, and with no signal, comes no phone call, that’s an opportunity lost. In addition to this, network signals reportedly die out for hours on end. The disservice and inadvertant attitude towards the paying customer must be checked sooner rather than later.
Government, per se, must be held accountable for the microeconomic failure which bears resemblance of an unhealthy quasi-monopoly. The three said entities have long enjoyed positions of monopolistic privilege since the implementation of mobile phone technology in Zimbabwe enjoying the comfort and super normal profits linked with operating in a barred market.
The visualisation below helps put things into perspective.
Analysis of the market above objectively reveals inequalities occasioned by the policy of Government. A competitive market would produce at P1 and sell at Q1 following that Marginal Cost=Marginal Revenue.
However, the three players can afford to produce less and charge higher due to the presence of imperfect liberty, therefore, they produce at Q2 and sell at P2. Consequently, the “agreed” fixed prices promote anti-competitive behavior. The shaded area shows just how much supernormal profit is there for the taking.
Where there more players, price would gravitate to a natural equilibrium of P1.Price, in this case, refers to cost of calls, texts, internet and handsets. With that in place, demand would increase coming all sorts of positive domino effects. As it stands area ABC on the graph constitutes a deadweight loss in terms of restricted output.
The imbalance noted distorts any hopes Pareto optimality leaving the consumers in a worse of situation
In Malawi, a country with a similar populous to us, there is no general law stringently regulating market entry such as the $100 million licensing fee charged by Potraz. I know of no country in the SADC zone in which entry requirements are so little oppressive. A total of 5 networks are in operation with Vodacom looking to add a 6th.
That’s a sum total of 2000 additional jobs or 12million boost to household incomes/purchasing power. As a result, 2 more networks will add approximately 0.2% to their total GDP in 2012.A notable achievement considering how relatively small the sector is in term of total market capitalisation.
Botswana operates 3 networks with just the 2 million population. Statistically speaking, it has one of the highest levels of mobile penetration in Africa. This fact reiterates the above graph’s assumption of effective demand increasing as a result of augmented merchant participation.
The Ministry of Transport, Communication and Infrastructure, who are responsible for the tendering and licensing process said the idea of expansion was previously touted to South African telecoms giant MTN, who supposedly choose to commit by means of capital injection and technical enhancements into the Netone brand in lieu of acquiring their own licence.
For many reasons, that’s difficult to believe, especially as no deal has been reached hitherto.
What’s closer to the facts is a clear conflict of interest given that Government owns and manages Netone .As it were, they find no immediate need to augment the sector with extra networks. The assumption is that additional players could mean less business/profits on their part.
Where this matter fluently attended, the wealth of the nation would subsequently increase whilst perfecting the competition would ensure networks are compelled to improve service or risk losing customers altogether. Telecoms are just but one example of microeconomic malfunctions in the country.
I honestly believe were a task force of dedicated economists set up to recognise and correct such abnormalities in all sectors, we could collectively add 3%-4% to the nation’s annual GDP and significantly reduce the problematic unemployment levels.
The writer, Bhekinkosi E Ngubeni specialises in development economics, contact him on email: [email protected]
