Bottom of the pile NetOne needs $570m

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STATE owned mobile phone operator NetOne snapped losses and turned a $3 million operating profit in 2013 but requires a strategic investor who could inject $570 million.
The money is needed to expand the company’s network to enable it to compete with rival companies, managing director Reward Kangai said on Monday.
NetOne, the country’s oldest mobile phone operator, has fallen behind Zimbabwe’s two other networks – Econet and Telecel — in terms of subscriber numbers.
Kangai told a parliamentary committee that NetOne sees its turnover growing by four percent to $110 million in 2014 and remains optimistic that its profit margins may improve in the coming years.
He added: “To be able to offer a competitive very good quality of service, we need roughly 2,300 new base stations.
“Multiply that by $250,000 and will give you an indication on how much is required just to give you the access network just make sure that everyone can access the network, not only just access the network but access good quality network.
“That is the amount of money required. So we are looking at $570 million roughly. It is no secret that our shareholder is government and government is grappling with other issues.
“The question then is how do you raise this level of capital? The government has been assisting us in terms of access to certain loans. We appreciate that assistance, but I think we also need to appreciate the level of investment needed.
“If you can’t invest that much, then for sure you will continue to have this low market share. What others are doing, which is something that we were discussing, is having possible strategic partnerships with big operators.”
NetOne’s subscriber base currently stands at 2,7 million, or 18 percent market share, from near dominance at inception as the country’s first mobile network in 1996, Kangai said. NetOne targets 3 million subscribers in 2014.
Kangai said NetOne has, in the absence of government funding, relied on short-term loans mainly from China and internally generated funds to fund capital projects after talks of engaging a strategic partner stalled despite initial commitment by government.
“There are major advantages and disadvantages (in getting strategic partner), but I would like to think that the advantages far outweigh the disadvantages,” said Kangai.Advertisement

“It would be a way of raising this kind of capital for the network development but there also some people with hidden agendas in this whole thing. It is inevitable.”
Pressed on the “hidden agendas” frustrating the quest for new investors, Kangai said: “I will leave that to the shareholder to deal with that particular issue, but certainly from the network’s point of view, simply looking at the capital requirements, the right type of strategic partner would bring you that capital requirement.”
The network’s average revenue per user (ARPU) declined from $3,91 in 2012 to $3,76 last year and is projected to further drop to $3,06 this year in line with the general decline in voice usage as more subscribers use social media platforms to communicate, Kangai said.
In 2012, NetOne’s revenue was $93,7 million, last year, NetOne’s revenue rose to $105,5 million from $93,7 million in 2012. The company is targeting $110 million revenue in 2014, he said.
“We believe that NetOne can do better with adequate and timely funding,” said Kangai.
“There has been quite a long period of undercapitalization resulting in NetOne lagging behind its competitors in terms of quality of service, innovation and product scope. It has been really critical in an environment where the first mover is always a winner.”
Kangai also pleaded for NetOne’s exemption from procuring its equipment through the State Procurement Board, to ease bureaucratic bottlenecks.