Falling ARPU's do not necessarily mean that our doom is imminent

Greetings followers (yes that includes both of you and my friend D)

As you know I have been on my travels, and have just returned from the annual get together of the telecoms industry in Africa, AfricaCom. All the usual suspects were there, plus one or two newcomers worthy of a mention.

Our sister company ForgetMeNot Africa, had a stand and were shortlisted for the best new technology of the year award, so well done to them. And I, as mentioned previously had the pleasure of presenting and discussing the issues of tackling falling ARPU’s in one of the event workshops. I also spent some time chatting to James Middleton, editor of Telecoms.com, a transcript of which found it’s way into the event journal and which I feel is worthy of repetition here… so sorry if you’ve already read it!

JM:

What are the main points and conclusions you will be making in your presentation?

GG:

Falling ARPU's do not necessarily mean that our doom is imminent.

Mitigating against falling revenues must be addressed from both ends of the equation, i.e. increasing subscriber base and reducing costs.

Increasing the subscriber base requires radical new thinking for many large Telco's and there size may actually work against them as the leaner more nimble competitors find ways to out-maneuver the big guns.

JM:

At present, Africa leads the world in mobile growth. But when will that growth start to slow and how can it be countered?

GG:

The untapped parts of the African market are definitely at the low revenue end so whilst there is a large pent up demand for mobile services, the speed of adoption will be directly related to the abilities of the industry to continually reduce the cost of access devices and available services.

In my view the growth is unlikely to slow over the next year or two, but after that networks will need to look beyond mere cost reduction to mitigate against the slow down.

Consolidation among the 4th, 5th and 6th networks in African countries will become essential for their survival.

JM:

We've seen some big regional merger proposals fail recently. Does the African mobile sector still offer potential for foreign investment?

GG:

Yes. There are opportunities in infrastructure ownership, (independent ownership of shared towers for example) and in strong brand led mobile services (MVNOs) and in the field of mobile content, which is relatively untapped in most African markets.

Internet access via the undersea cable network rolling out at present will result in a quantum leap in available resource for content download and I anticipate a mini explosion in this space.

Foreign investors will also still find opportunity in consolidating the late entrants into the various markets.

JM:

Are there enough home grown investors within Africa?

GG:

There are plenty of passive investors, but active indigenous telecoms operators are often left behind by the sheer speed of evolution of the industry and the scale of investment required to succeed.

JM:

What can the African communications sector teach the rest of the world's telecoms markets?

GG:

How to run low ARPU operations in very hostile environments....

JM:

How well are the region's governments responding to the needs of the continent's telecoms sector?

GG:

If one is to generalise the answer is very poorly. There are exceptions, but the general bureaucratic quagmire and punitive tax regimes that operators often find themselves in can be a serious hurdle. Many governments are threatened by the access to information that telco's can offer, whilst others recognise the value but also see it as a cash cow for the fiscus.

JM:

Which three carriers with interests or assets in Africa are worth watching over the next year and why?

GG:

Well Zain's on again off again sale of African assets is going to be strategically important for the continent. At this stage it looks like the group as a whole may have a change in control, which could lead to bigger and better things for the company in the year ahead.

Also, MTN's failed "merger" with Bharti will leaves them 100 million Rand out of pocket and no further ahead with their growth into Asia aspirations.... so what will they do next?

At the other end of the scale, there is TelecelGlobe who are also ones to watch. Having exited much of Africa, they have reorganised and are appear to be on the acquisition trail around the continent.

See you next time for a Christmas special!

Geoff

Coffee and Croissants

As Celsys is in a closed period right now, it would be inappropriate for me to comment in too much detail about the performance of the Company for the year ended 31 August 2009.

However, I can tell you that phase two of our scratch and win airtime distribution initiative has launched in conjunction with Spar and Delta/Coca Cola and after the first week is being well received by all. There are loads of prizes and cash to be won which always seems to motivate people, but interestingly, much of the feed back from the stores is about our reliability in terms of service and product delivery. This is always most heartening and we will continue to make sure that we attain even greater heights as the promotion unfolds. We are working now on the next promotion, which should kick off in time for Christmas... can you believe we are talking in those terms again already?!

As for me I have been kindly invited to attend a Telecoms Executive Summit in Nairobi in October. This annual event organised by NGT (Next Generation Telecoms) for Telecoms execs from around Africa involves a series of workshop style meetings, keynote addresses and of course the obligatory word(s) from the sponsors. In my view there is no substitute for good old face to face discussions, and although my friend D, often argues with me about this, I know I'm right!

Then in mid-November I am also addressing a workshop at the annual AfricaCom Conference and Exhibition which is another occasion where the industry gets together en masse to showcase their products and services and debate a variety of topical issues. Dealing with shrinking margins in the industry is what I shall be looking at, which is certainly pretty topical for us here in Zim!

If you are a supplier or customer in the Telecoms sector I urge you to get to Cape Town in November for this one. In conjunction with Forget Me Not Africa, for whom we are a distributor, we will be demonstrating the Message Optimiser SMS technology that is being introduced to Telco's across the continent so there will be a team of us there to welcome you!

Last week we also officially launched the new range of Opteva ATM's from Diebold, at a breakfast event held during the IT Africa Exhibition in Harare. Dave Nixon from Diebold was on hand to talk directly to our customers and there was significant interest in the full range of self service equipment available from Diebold. We also used the platform to announce our distribution agreement for Creon Point of Sale terminals, and these too were of great interest to our gathered audience. I made the point at the time, but it is worth making again now, that for probably the first time in Zimbabwe, we had an over-subscribed event, where almost everyone arrived on time, or even early! D said it was the coffee and croissants that got them there, but I think it was a genuine interest in the new Diebold ATM's amongst Zimbabwe's bankers that is the real reason!..and as you know.. I'm always right!

That's it for now.. a bit later than usual I know... but it's year end..we've been busy!!!

Geoff

AfricaCom 2009

If you are of a Telecomms mindset, then no doubt you will be aware of the annual AfricaCom conference that takes place in Cape Town in November and is now in it's 12th year.

This year the line up of speakers and topics is stronger than ever, no doubt due to the inclusion of yours truly amongst that esteemed gathering of presenters. Actually, it is very flattering to be asked to give a Zimbabwean perspective at this pan African event, albeit in a very small and focused way and I am looking forward to the opportunity. (Even though my friend D, thinks I must have paid them to let me speak..bah!)

Undoubtedly the telecomms industry is one of startegic importance to our country as we look to find ways to open up the airwaves. Being land-locked, access to the myriad of undersea cables that are snaking their way down the East and West coasts of our continent is particularly mired in international red tape and regulatory complications. However there is absolutely no doubt about the correlation between access to affordable bandwidth and the speed with which a developing country can grow. Here's hoping someone in authority is listening!!

Meanwhile we are left to contend with the severe limitations of our outdated infrastructure and legislation and I have been asked to address the aforementioned audience on the subject of strategies to increase margins in an environment of falling ARPU's. Now there's a thought! Although Zimbabwe is on a wobbly but nevertheless worthwhile recovery path, we still have the daily peaks and troughs of emotion trying to operate here and in ARPU terms (that would be average revenue per user D!) we are experiencing the wild fluctuations that are bound to be part and parcel of a change in currency and revaluation to real terms of the costs of goods and services. Which brings me sadly back to my old hobby horse. It seems to me that the network's approach to falling ARPU's is to simply jack up the price...without any commensurate improvement in services..... hopefully they'll pitch up at the conference and learn something!

Speaking of speaking, I'll also be at the Annual Institute of Chartered Accountants Winter School in Nyanga next week, to discuss investment opportunities in Zimbabwe. Depending on who has said what to the press in the preceding days, it will either be a riveting and exciting conversation or a very short chat.. we shall see.

While I'm on the subject of fluctuations, I wonder if there is anywhere else in the world where business is subjected to the same level of confusing legislation and contradictory communications as we are blessed with here. Take my other favorite subject, wine, for instance.

Having reduced duty on importing this product to zero percent, for producers with SADC certificates of origin some 12 months ago, we suddenly find ourselves with a new 15% duty imposed upon us for the same product. Is this protectionist? Does it reflect an abject lack of understanding of free market principals? Is it an attempt to increase Government revenues or reduce currency outflows? Either way, it flies in the face of what the SADC and COMESA trade agreements set out to achieve and in reality probably reduces the net tax revenues for the fiscus. So the more that things change here, the more they stay the same it seems.

Till next time, salute!

Geoff

The trees in front of us are thinning!!

I don’t know if you’ve looked at our share price graph recently, but if you are of a medical disposition you might think that the patient is dead…. Flat lines on an ECG are never a good thing!! However, as we all know, looks can be deceiving, so my advice is to always take a closer look.

At a consistent 3/10s of a US cent we of course believe that we are undervalued, but it takes a while for the good news and the progress to filter through to the market, so let’s not get too upset about that just yet.

But while we’re on the subject of heartbeats, mine skipped a few the other day. I discovered something that I feared may be lost forever, and with that discovery comes a new lease on life, a new inspiration, a reminder of why we get up and do this every day.

Now before you get too excited, let me tell you that we, along with everyone else, are not out of the woods yet… but what I rediscovered was the lost art of being able to focus on the real issues of our businesses; marketing, selling, product development, production, and all this because we have a vaguely stable currency and a marginally less tilted playing field.

I was in Zambia last week, and in conversation with a group of local executives, the subject of which was “the Zimbabwe threat”. Interestingly they were very concerned about losing ground and opportunity to their Zimbabwean counterparts. When I asked them why they were so worried about their decimated neighbour, they were very quick to point out that as a nation, during all of the chaos and disruption, the business community somehow survived, and in some cases even flourished, so how much more energetic, productive, creative and successful will Zimbabwe now become as the economic tide begins to turn?

They have a point.

And already we can see that at Celsys. Our energy is being channeled into productivity, our efforts into areas of growth and management and staff are seeing real reward and progress for their daily endeavours.

As I said, we are not out of the woods yet, but it sure is good to see that the trees in front of us are thinning!! Of course “the future just ain’t what it used to be” (thank you Meatloaf), but if we can take the best of our previous experiences and carry that with us into our future, as inspiration or just as a reminder that what we once had was real, then surely that is a good thing.

Geoff

'Over a barrel'

Why is it that utility companies (both public and private) feel they must compensate for the last ten years of losses in the first ten weeks of “dollarisation’? The term “over a barrel” starts to resonate a little too strongly right now as we learn to come to terms with ludicrous price demands from service suppliers, who somehow also believe that they should squeeze us to suffocation point as a supplier.

Clearly the term “unity” remains the preserve of the political arena, whilst commerce and industry continues along a far more carnivorous “dog eat dog” path to financial enlightenment.

Well let me say this to anyone who finds themselves ready to let their greed devour their Zimbabwean customers or suppliers; the same innovative survival culture that has brought us this far, can just as creatively be applied to finding more competitive supply chains, and more responsible customers, here or elsewhere, for the playing field is now level in USD Zimbabwe.

So, we continue to strive for quality improvements every day, with our costs firmly under control and our financial systems now dealing with manageable numbers, the time has come for us to turn our attention to marketing our products and services… now there’s a concept we haven’t had to consider for a while!

I’m prepared to bet that the companies that apply their collective wisdom to creating and providing goods and services that customers want or need, at a fair price and on mutually beneficial terms, will still be here five years from now and operating successfully… whilst those that chase somewhat shorter term enrichment goals, may well find their brands disappear along with their customer’s long abused loyalty!

Ok, that’s it for the soap box this month!

Geoff Goss
Country Manager
LonZim Plc
Chief Executive Officer
Celsys Limited
Block 5
Arundel Office Park
Tel: +263 4 369160
Fax: +263 4 369179
www.celsys.co.zw
www.lonzim.co.uk

hey presto

Well.... 2009 has started... perhaps not with the bang we would have wanted,
but certainly I can hear the faint sizzling of a lit fuse!!

To be honest, we wondered if we would be operating in January when we shut
up shop for Christmas, but we got back to endemic dollarisation, and "hey
presto", everything has changed again!

In an environment where the dollar we collect today has the same value as
the one we spend tomorrow, there is a sense that we can start to get back to
what we should be doing every day, managing our business rather than
consuming every waking hour trying to hedge our currency bets, and stemming
the depreciation blood flow! The down side of course is that already
suppressed volumes have, and will continue to plummet even further, but if
our capacity utilization is 10%, and we can produce that 10% in at least a
breakeven fashion then certainly we are better off.

The next trick of course is how to start using up some of the excess
capacity!!

Obviously it's not going to be utilized for this economy in the foreseeable future, so now more than ever, there is an urgent need to export!
Interestingly, from a Celsys perspective we believe that we can start to
focus appropriate amounts of time and resources to this endeavour, with
hopefully meaningful results.

I would also like to talk briefly about Celsys Print at this point. I am very pleased to report that we have made some important high level appointments at the Print Division and we have embarked on an ISO quality
standards programme to ensure our international competitiveness is more than just price based.

As you will recall, Linc Pearson joined us from Fidelity Printers last year as Technical Manager responsible for all production and quality matters. In January we also appointed a new General Manager, Adam Lemon who has been
tasked along with Linc, with taking the business to the next level of
success and beyond. Adam's predecessor, Dhiru Raja, has be handed the
biggest challenge of all, as his new role is to establish and develop
regional joint ventures for us in the security printing field. He has also
been charged with the crucial task of securing export markets.

May I take the opportunity to wish them all the very best of luck, as
together we start the process of taking Celsys out of a care and maintenance
phase and into a period of aggressive, sustainable and profitable growth.

That's it for now... Happy New Year!

Geoff Goss
Country Manager
LonZim Plc
Chief Executive Officer
Celsys Limited
Block 5
Arundel Office Park
Tel: +263 4 369160
Fax: +263 4 369179
www.celsys.co.zw
www.lonzim.co.uk

WARS are FOLLY

I probably don't have to tell you that nigh on every business in Zimbabwe is staggering towards the annual shut down for a bit of respite from this twister of an economy. How it is possible that we still have no political resolution, or injection of economic common sense is beyond me, so we continue to dance along the tightrope, which really now appears to be burning up behind us.

Be that as it may, we have a responsibility to do what we can in the best interests of our stakeholders, and to that end, we somehow manage to keep our staff employed, and customers supplied and our creditors paid.

We have made the great leap of faith into the world of FOLIWARS this month, albeit with only certain of our products, as the RBZ felt that the sale of airtime and security printed documents, should not be in any currency other than Zimbabwe Dollars and at a controlled price! Now there's a thing! Interesting word FOLIWAR. In my view all WARS are FOLLY, but here's hoping this recent initiative is not! Time will tell.

Also in the 'Good News" section I am pleased to advise that our partnership with FMNA (see last months Blog) is already bearing fruit and we have been part of the first licence sale in Lesotho and anticipate the next one to be here in Zimbabwe. Although the commission on the licence fee is most welcome, the real opportunity for us lies in the on-going revenue generated from the messaging traffic, all of which is US$ based. Of course there's nothing for nothing and we will have on-going account management responsibility for our sites and are also undertaking the role of IM support centre for FMNA's Chatbar product. If this all seems like Follywords to you, take a peek at www.chatbar.com and www.fmnsoft.com.

If you are reading this, it means you are still alive, and that's a good thing. I hope you have a relaxing Christmas break and if you are outside the country looking in, keep hoping that the change is coming soon, and if you are on the inside looking out, well done for getting this far!

Geoff Goss
Country Manager
LonZim Plc
Chief Executive Officer
Celsys Limited
Block 5
Arundel Office Park
Tel: +263 4 369160
Fax: +263 4 369179
www.celsys.co.zw
www.lonzim.co.uk