Econet familiar with working in difficult markets

By PETER GRIFFIN telecoms writer

Those who have caught the name Econet Wireless over the past few weeks might be excused for thinking that the company is from from Zimbabwe.

But Econet, which is about to become New Zealand's third mobile player, has its roots in neighbouring South Africa.

Econet's head of commercial services Nic Rudnick said the mistake was common because Econet's public listing was on the Zimbabwe Stock Exchange.

He said Zimbabwe was just part of Econet's mobile empire. It also ran networks in Botswana, Nigeria and Lesotho and had operations in South Africa, Morocco, Malta and the UK.

Mr Rudnick and other Econet executives are in New Zealand as part of the company's moves to build a GSM network here.

It is starting negotiations with Vodafone on the tricky issues of network roaming and cellsite co-location.

Econet has already invested around $24 million in New Zealand and is planning to develop a network of 355 mobile cell sites in the main centres.

Mr Rudnick said Econet looked at 18 countries before the availability of spectrum and regulatory change attracted it to New Zealand.

"I hope we're over the main hurdle," he said of the effort that the company had put into securing the legislation that would allow its business plans to work.

The real test will be the company's ability to gain customers, in a market where mobile penetration is around 65 per cent and there are two dominant players, Telecom and Vodafone.

"We think there's scope for further competition," he said.

"The fact that there's higher market penetration doesn't mean there's good competition.

"We think we can operate with lower costs, hence offer a cheaper yet high quality service.

"We're not here to fight with Vodafone.

"We hope we won't have to go to the telecommunications commissioner in dealing with them, but the mere existence of the position is meaningful."

Econet lobbied hard to win the legislative changes needed for it to set up shop in here.

But it is used to fighting to get its way.

In Zimbabwe, where it has around 50 per cent of the mobile market with 150,000 subscribers, it launched its mobile network early in 1998, after a five year battle during which it took on the Zimbabwe Government and the state telco PTC in the courts.

The proceeding dragged on, and during this time PTC launched its own mobile network to gain a a two year start on Econet.

The cellular licence that Econet went to the Supreme Court over was eventually awarded to Telecel, a consortium backed by, among others, President Robert Mugabe's nephew Leo.

But this was withdrawn after a challenge and was finally awarded to Econet.

Econet listed on the Zimbabwe exchange in September 1998.

The company was the first to introduce prepaid services in Zimbabwe with "Buddie" a service that now has 90,000 pre-paid subscribers.

Things have gone comparatively smoothly in Botswana, where Econet arrived in 1998, and it now has 200,000 subscribers there.

Corruption in Nigeria, where Econet won a licence in February has caused headaches for the company.

But that country, with a population of around 130 million is potentially its most valuable market.

"We can't roll out the network fast enough in Nigeria,"he said.

"The day we launched in Nigeria, there was a 3km queue for people wanting to sign up."

The company's attempts to enter the Kenyan mobile market through the privatisation of Telecom Kenya remain bogged down in politics.

Mr Rudnick says the competitive environment Econet faces in New Zealand is far different to that of Africa.

Nowhere else, for example has Econet taken advantage of mandatory roaming and cellsite co-location provisions.

"But we've faced big competitors, the likes of France Telecom, in most of the markets we are in."

Econet's New Zealand strategy will have another strand.

The company would be building up its research and development in New Zealand.

It would carry out applications development here to take advantage of relatively cheap development overheads and a plentiful supply of skilled labour, something lacking in Econet's African markets.

"We have a huge skills problem over there.

"Across Africa we have to bring in a lot of our own people, mainly from South Africa and England."

He said Econet employed around 1000 people internationally.

It was likely it would replicate the High St stores and dealership franchises it had established in Africa.

"We're not going to be bringing in lots of people from overseas, just a handful to maintain the corporate culture."

Locally developed applications would be exported back to the African markets, potentially opening New Zealand businesses to several hundred thousand subscribers.

"Everywhere I look here there are innovative small businesses doing something in the IT space."

Econet was already talking to a local company that had developed ring tones for mobile phones.

Mr Rudnick said investors in South Africa, Europe and New Zealand were backing Econet's New Zealand expansion, which analysts estimate could cost up to $250 million.

The bulk of the company's mobile customers are pre-paid cellphone users, but mobile is not its only area of business,

Its satellite operations were "immensely profitable" he said.

World Stream, a South African company owned by Econet, runs audio and video streaming services and it also has Ecoweb, an internet service provider.