Zellco, Netone Dispute Rages On

Financial Gazette (Harare)

Karren Shava

28 April 2011

MOBILE telecommunications network operator, NetOne Cellular, has retracted its initial statement cancelling the service contract with its agent, ZellCo Cellular over a payment dispute, but maintained its ban on bill payments through the agent.

This was after ZellCo sought a provisional order seeking the nullification of NetOne’s decision cancelling its service provider agreement with ZellCo, which was granted by Justice Patel on April 13, 2011.

But the judgment ordered NetOne to not only retract its earlier statement cancelling the agreement, but to also restore ZellCo’s rights to bill NetOne customers in terms of the agreement.

Documents in possession of The Financial Gazette indicate that ZellCo is now seeking to approach Justice Patel after what it alleged to be contempt of the High Court order or to file an urgent chamber application for contempt of court by NetOne.

In a letter to NetOne’s managing director, Reward Kangai, ZellCo’s lawyers, Chirimuuta & Associates demanded that NetOne’s text message to clients fell short of complying with the High Court order.

NetOne issued a statement early this month to subscribers on ZellCo’s books that it had cancelled its service contract with ZellCo advising subscribers on its network to stop payments through the agent.

“Customers will now pay their bills directly to NetOne. There will be no loss of service,” NetOne said in the statement. However, the telecommunications firm issued a statement later last week informing subscribers that it was retracting its earlier statement which it said had been issued in haste.

“The SMS of 05/04/11 regarding termination of ZellCo’s service agreement was sent prematurely and is retracted. We regret the error and advise that although a payment dispute is in progress, the agreement is still in force. Subscribers must pay their bills directly to NetOne until the dispute is resolved,” said NetOne.

The interim relief granted to ZellCo ordered NetOne to retract its text message by way of a similar message to the effect that the agreement was still valid and subsisted and that customers should continue to pay their bills through ZellCo.

ZellCo said, through its lawyers in correspondence dated April 19 2011, that it viewed NetOne’s actions “as not only ill-conceived and ill-advised but (also as) a blatant attempt to circumvent the net effect of the provisional order even before it has been confirmed”.

ZellCo was one of two agents contracted to deal with post-paid clients on behalf of the State-owned mobile operator. Among its functions were to sign up new contract line subscribers and bill the customers and charge NetOne a commission for the services.

However, the mobile cellular operator had service provider agreements with three companies when it started over 10 years ago. These were Cosmos Cellular, ZellCo and CST Cellular, now FirsTel Cellular, who collected revenue from subscribers on behalf of the network in return for commission.

Cosmos lost its agency status a few years ago after a payment dispute with NetOne. ZellCo and FirsTel had been the only service agents for NetOne after the termination of Cosmos’ contract.

It is understood that NetOne is owed over US$30 million by more than 10?000 of its post-paid customers, most of them serviced by ZellCo, although this is unrelated to its dispute with ZellCo. The mobile service provider has over one million subscribers, with pre-paid customers making up the bulk.

ZellCo, formerly a unit of NetOne, was taken over by a consortium of Zimbabwean businesspeople who acquired a 60 percent stake in the company from NetOne in 2009 in a deal said to have been worth US$1,8 million.

The consortium, whose investment vehicle was Farpin Investments, was led by the current ZellCo board chairperson, Big Chitima, an expert in telecommunications infrastructure development.

Chitima had been involved in a number of infrastructure projects involving the National Railways of Zimbabwe, TelOne, NetOne, Telecel and Econet Wireless, the country’s largest mobile operator.

As a result of the shareholder changes, the then ZellCo chairperson, Calistus Ndlovu, and other members seconded to the board by NetOne stepped down.

Ndlovu is the current NetOne board chairperson.

NetOne invested in ZellCo in the late 1990s through a debt conversion arrangement which saw it acquiring a controlling 60 percent stake, with TeleNetwork Services (TNS) holding the 40 percent balance.

ZellCo provided marketing and sales services for NetOne, one of the three mobile networks operating in Zimbabwe. The company operates six branches countrywide with two in Harare and one each in Bulawayo, Masvingo, Gweru and Mutare.

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