VoIP Business and Virtual PBX

Africom versus Econet

ONE of Zimbabwe's leading telecoms players, with more than 70% market share has of late been flighting full-page adverts on a product, promising savings of 20% on existing telecoms costs. Instinctively, my reaction to this advert was to surmise that telecoms incumbents could all things considered be embracing a low-balling strategy, in reaction to newer players offering low-tariff calls.

In this article, Africom is used to typify newer telecoms players, during Econet is used as a typology of established telecoms players. It turns out the new product, although branded differently, is in substance based on the voice-over-internet platform. VoIP (Voice over Internet Protocol) is a innovation that allows voices calls to be made in every way over the internet, by-passing the traditional voice transmission infrastructure. By obviating the need for securing and maintaining expensive telecoms infrastructure, VoIP (Voice over Internet Protocol) calls be offered at ultra-low price points to potential consumers. Econet's VoIP (Voice over Internet Protocol) local calls, as advertised, range from 6 US cents per minute for intra-network calls to 12 US cents per minute for calls destined to other local networks. Africom's local tariffs are a mirror image of Econet's local VoIP (Voice over Internet Protocol) tariffs.

Similarities between the tariff structures for Econet's new VoIP telephone product suite, and Africom's voice call offerings could at face value point towards similar business strategies. Nothing could be farther from the truth. Same price, different technologies

Fundamental difference between Africom

A fundamental difference between Africom and Econet rests on the telecoms standards they employ to transmit voice and data. Econet uses the Global System for Mobile Communication family of standards during Africom deploys the Code Division Multiple Access family of standards, including the fairly advanced CDMA2000. Both GSM and CDMA standards can allow calls to be made from cellphones using cards, SIM cards in the case of GSM and UIM cards in the case of CDMA.

For the consumer, these differences in nomenclature are to a larger extent immaterial, otherwise irritating. It is not the intention of this article to delve into the technical nuances of these standards. What is relevant to this discussion are the business implications offered by these standards. From a business perspective, Africom is able to offer voice calls at lower price points than Econet's GSM cellphone-dependent voice calls. Two questions arise: First, why can't Econet just switch to CDMA and offer voice calls at lower price points to its current 6,4 million subscribers? Second, if Africom can profitably offer good quality voice calls on cellphones, why is it such a small player, if not near a fringe player?

To be able to address these critical business strategy posers, we will elicit the wisdom offered by two good management theories on technological change, namely competence-enhancing versus competence-destroying, and modular versus architectural. Tushman and Anderson advanced the competence-enhancing versus competence-destroying technological change theory.

They found that when incumbents in an industry face a technological change that makes the incumbents' skills, knowledge and experience redundant, they surrender their market dominance to players whose current stock of competences can leverage on the new innovation. Modular versus architectural technological change, the forerunner to the disruptive change theory, helps us assess the likely consequences of switching from GSM to CDMA standards or vice versa.

Henderson and Clark were the first to note that when leaders in an industry are faced with technological changes that affect the individual elements that make up a innovation as opposed to changes that birth new interrelationships between and among constituent elements, incumbents have a high chance of maintaining their market dominance. Put graphically, as long as a house owner is required just to change doors and window frames, they can cope.

The explanation to this is that Econet can quickly adapt to changes at the component or modular level because they already have expertise just as engineering, supported by business processes that are robust enough to incorporate these changes into the larger dominant technological architecture.

As such, it may be practically impossible for Econet to switch to CDMA standards as that would make their current investment in the key pieces of its infrastructure redundant. Adopting CDMA would imply cannibalising their multi-million dollar investment in base stations. Few manufacturers make cellphone handsets that are CDMA-compatible. Switching to CDMA standards would mean that Econet either has to make proprietary handsets or enter into a joint venture with a CDMA-compatible cellphone handset maker.

Though Econet 's VoIP tariffs are similar to Africom's, their business models and cost profiles are different. On the cost side, even though Africom's voice tariffs are similar to Econet's VoIP tariffs, Africom's service is cheaper, the reason being that a VoIP user has an additional internet usage cost.

Internet connection

Africom's CDMA calls do not need an internet connection. Econet appears to be targeting its higher value clients with their VoIP offering. Even though they are offering a very competitively-priced product, it is not disruptive. Disruptiveness is not a trait intrinsic to a research, however how a research is deployed is what makes it disruptive. By targeting the high-end with VoiP, the innovation is sustaining.

In contrast, Africom is deploying its CDMA products in a disruptive manner. They have low-priced mobile phone handsets which work similarly to the GSM mobile handsets. Africom is silently courting lower to mid-tier clients with low-priced voice call on a 'normal' mobile handset.

Thus Africom's low-priced CDMA phones offer higher mobility than Econet's VoIP offerings. But, Africom's CDMA service suffers from limited geographical coverage. Limited geographical coverage is a performance challenge in other words restricting Africom's CDMA low-price service from amassing huge customer numbers. Should Africom widen its CDMA geographical coverage during maintaining its low-price points, its value proposition is likely to be too powerful to be resisted by mid and top-tier telecoms clients.

However, why is Africom for all that a fringe player, given that it has a technological platform that allows it to significantly undercut prices for conventional calls? Investment in network development and upgrading is a capital -intensive exercise.

More information: Theindependent.co
  • ·

    Africom Mobile Handsets

  • ·

    Ip Code For Africom Zimbabwe When Making An Ip Cal