Big-bang disruption: Econet, Telecel beware

IT’S all too easy to get lost in the emotional storm surrounding the barney between Telecel Zimbabwe and Econet , Zimbabwe’s top two network operators, missing the real issues in the process.

By Brett Chulu

Telecel has cried foul, citing Econet was “throttling” calls from Telecel subscribers destined to Econet numbers, apparently, in retaliation to Telecel’s cheeky promotion allowing Telecel subscribers to call any network at half the normal rates. This seems to have piqued Econet enough to sledge-hammer its smaller rival.

Distressed business model

Nettled by Telecel’s hitherto unheard of call-our-rival-at-half-price promotion, Econet, wilily, side-stepped the throttling accusations and rained on Telecel’s charges, drawing on the argument that Telecel was not a licenced operator and thus as per Econet’s new license stipulations Telecel could be disconnected.

Econet took the Public Relations(PR) war to the social networking battlefield by posting the following on their Facebook page: “Econet Wireless wishes to state the following regarding interconnection with Telecel Zimbabwe: Econet Wireless was on July 10 2013, awarded a renewed 20-year licence following the expiry of the 15-year licence issued in 1998. This licence places certain strict conditions on our operations.

Clause 5.2.2 of our licence requires us to interconnect only with licensed operators. This paragraph derives from Section 61 of the Act, which allows a licensed operator to interconnect with another licensed operator. Section 2 of the Act defines a licensee as a holder of a valid licence issued in terms of Section 37 of the Act.

There is no obligation to interconnect with a provider of telecommunications services that is not validly licensed in terms of Section 37 of the Act…”

Econet pointed out that Telecel had been operating without a valid licence following revocation of its licence in 1997. Assuming Telecel had a valid operating licence, it would have expired on June 2 this year. In all fairness, if Telecel does not have a licence, whose cost is reported as US$137,5 million; it simply means they have an artificially low cost structure. Sound as it might appear, this argument is side-stepping the real issue. The meat here is what if there arises another mobile network operators with a real low cost structure?

Tellingly, the intimation by Econet of Telecel’s “trading practices that have distorted the playing field” is closer to the nerve-centre of the issue than the licensing argument thread. Has NetOne renewed its licence?

Why are calls emanating from Econet and terminating at Telecel going through? The distorted trading practices argument is not on. Promotions, by their nature can deliberately distort pricing structures or business models, albeit, temporarily. That’s the whole point of a promotion. Beneath the fury and froth of peeved rivals is the fact that our local mobile network operators’ business models are just not resilient enough to withstand a truly low-cost competitor who can sustain low-balling, not as a promotion, but as an enduring business model.

What we are learning, sadly though, is that the cost structures of our local mobile network operators are not competitive. It’s worrying. We have a bubble that is waiting to burst.

This hurly-burly business of sparring each other in the public space detracts our local mobile network operators from the imminent danger of fast-paced changes wrought by IT innovations that have a reputation for disrespecting national boundaries.

Big-bang disruption
A big-bang disruption, according to the discoverers of the phenomenon, is an innovation that enters the market cheaper and better in quality than the existing marketing offerings. That’s a potent combination of value propositions defying entrenched strategy wisdom as taught in our business schools.

Michael Porter, a celebrated professor of strategy at Harvard Business School has made our business leaders believe there are just two strategy choices; offer high quality and charge a premium or mass-produce and charge low prices.

The notion that you can provide high quality at low price is not part of Porter’s gospel. Disciples of Porter are many in Zimbabwe.

I am very afraid an unquestioning acceptance of Porter’s prescriptions will surely lead Zimbabwe’s business leaders to develop strategic blind spots (or is it strategic hearing impairment) that they cannot hear big-bangs all around them. Bing-bang disruptions defy Porter’s strategy formulae. It is all too clear to miss the fact that, largely, our local MNOs are borrowing Porter’s spectacles when looking at their strategies.

A big-bang disruption’s potency lies in its ability to trigger mass dumping of old products en masse within a short period of time –– months or even weeks. Once people taste quality and affordability they have been known to disseminate their excitement via social networks, setting viral marketing endorsements.

Bing-bang disruptions do not give affected companies time to react. Things happen very fast. What’s even more worrying is that big-bang disruptions are usually started by hobbyists trying to make life easy for consumers through applications that have a social bias. Big-bang disruption is clearly seen in the mobile phone application (app) arena.

Zimbabwe’s mobile network operators are already victims of big-bang disruption. WhatsApp is to a large extent a big-bang disruption.

It’s a well-known fact that our local mobile network operators stirred up flimflam around multimedia messaging service (MMS), only for WhatsApp to pull the rug from under their feet.

WhatsApp provides a cheaper and better quality service than raw MMS.

Users of WhatsApp were able to share videos, audio files and pictures to a wider circle of friends locally and internationally for lower rates than the advertised local MMS rates such that MMS looked inferior and overpriced for that.

In the case of Zimbabwe, it wasn’t a case of mass defections from MMS to WhatsApp –– MMS was simply dead on arrival. The MMS hype just fizzled out.

Mass defections were shortly to follow, from SMS to WhatsApp. Again, WhatsApp beat our local mobile network operators’ SMS service both in terms of price and quality.

When Jan Koum and Brian Acton, ex-Yahoo software engineers, sat down to conceive WhatsApp in 2009, they had no intention to destroy SMS. They just wanted people to have a better platform to social network without the irritation of pop-up adverts. We now have so many Koums and Actons brewing the next big-bang disruption.

Instead of engaging in low-intensity PR wars, ugly spats, displaying each other’s dirty linen in public, our local mobile network operators should be investing their intellectual capital in finding answers to big-bang disruptors who are and will continue giving them headaches.
They may keep each other’s phones on silent but big-bang disruptions may forever keep them silent.

Reflect on it

Our local mobile network operators should be revisiting their business models to survive in the era of big-bang disruptors who enter the market with cheaper and better quality products and services.

Chulu is a strategic HR consultant who is pioneering innovative strategic HR practices in listed and unlisted companies in Zimbabwe –– brettchulu@consultant.com

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