MICROCAPITAL BRIEF: Econet Wireless Accused of Monopolistic Practices Regarding Mobile Money Service

Econet Wireless Zimbabwe, a subsidiary of the South Africa-based telecommunications company Econet Wireless Group, reportedly is being investigated by Zimbabwe’s Competitions and Tariffs Commission (CTC), the authority charged with regulating trade in the country, over allegations of monopolistic business practices [1][2]. The accusations focus on the Unstructured Supplementary Service Data (USSD) gateway, a means of communication between mobile phones and computers, that Econet introduced for banks in February 2014. The USSD allegedly allows Econet to charge a higher rate for the use of its services than it charges to those who have direct access to EcoCash or short message service (SMS also known as text messaging) through Econet’s separate, preexisting USSD. Unspecified banks reportedly claim that this situation forces banks to pay an inflated price set by Econet in order to provide access to EcoCash for their clients [3].

Earlier in 2014, Zimbabwe-based technology news outlet TechZim reported on an investigation by the Reserve Bank of Zimbabwe (RBZ) regarding allegations that Econet was automatically registering its customers for the EcoCash mobile money service in violation of the Money Laundering and Proceeds of Crime Act. RBZ has not addressed these allegations publicly.

As of February 2014, Econet Wireless Zimbabwe reported total assets of USD 1.2 billion, total liabilities of USD 570 million and 8.8 million subscribers [4]. As of December 2012, RBZ reported total assets of USD 873 million, total capital and reserves of USD -1.2 billion and total liabilities of USD 2.1 billion [5].

By Benjamin Krupp, Research Associate

About Econet Wireless Group

Based in South Africa, Econet Wireless is a telecommunications group with operations in Africa, Europe, South America and East Asia. It offers mobile and fixed telephone services, internet service and satellite services. The group’s subsidiaries include Econet Wireless International, Econet Wireless Africa, Econet Wireless Global and Liquid Telecom. Ecocash is Econet’s money transfer service that allows Econet customers to transfer money between mobile phones. Econet operates in Botswana, Burundi, China, Lesotho, Mauritius, Nigeria, South Africa, the United Kingdom, the United States and Zimbabwe.

About Reserve Bank of Zimbabwe

The Reserve Bank of Zimbabwe was founded in 1956 as the Bank of Rhodesia and Nyasaland. It is responsible for the formulation and implementation of monetary policy in Zimbabwe. It supervises the country’s financial sector, including commercial banks and other financial institutions. As of 2014, Dr Charity Dhliwayo is the acting governor of the institution.

Sources and Additional Resources

[1] TeleGeography: Econet Wireless Under the Spotlight for Mobile Money Service

[2] Competition and Tariff Commission: Competition and Tariff Commission

[3] The Herald: CTC Goes After Econet

[4] Econet Wireless Zimbabwe: Audited Financial Results for the Year Ended 28 February 2014

[5] Reserve Bank of Zimbabwe: 2012 Financial Statements

MicroCapital, April 24, 2014: Econet of Zimbabwe to offer Microloans for Entrepreneurs in Informal Sector

MicroCapital, March 9, 2014: Reserve Bank of Zimbabwe (RBZ) Limits Exclusive Agreement Between Telecommunication provider, Mobile Money Agents

MicroCapital, March 13, 2013: Deputy Prime Minister Mutambara of Zimbabwe Urges Banks to Stop Seeking Legal Action Against Econet’s Ecocash Mobile Banking Service and Start Competing

MicroCapital Universe Profile: Reserve Bank of Zimbabwe

MicroCapital Universe Profile: Econet Wireless Group

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