Data giants-VCL and ETL-also accused of ducking regulatory levies and government loan repayments
Skyrocketing data prices continue to hit the pockets of poor Basotho consumers. Yet an investigation by the MNN Centre for Investigative Journalism (the Centre ) has found that one of Lesotho’s mobile network companies has defaulted on regulatory fees, while the other has failed to pay dividends and repay loans to the government.
The data giants are also facing allegations of unfair billing practices. Early this year Vodacom raised the price of its weekly data bundles by 67 percent, while the price of Econet’s ADSL bundles jumped last month by 150 percent.
Despite the hefty increases, Vodacom Lesotho was slapped with a penalty last month for failing to pay regulatory fees – thought to be more than M4-million – by the July 1, 2019, deadline.
The Centre has established that the company now has to pay an additional levy of 20 percent of the outstanding amount, elevating its debt to around M5.5-million.
Three separate Vodacom officials were approached for comment on the penalty, but declined to say anything.
The locally-based Sekha-Metsi Consortium holds a 20 percent share of Vodacom Lesotho, with the controlling balance of shares being held by the South African Vodacom Group, a subsidiary of British-based Vodafone Group Plc.
In Lesotho, telecommunication companies are licensed and regulated by the Lesotho Communications Authority (LCA) and are supposed to pay regulatory fees to the authority at stipulated times every financial year.
Meanwhile, Vodacom’s sole competitor, Econet Telecom Lesotho, the Centre has learned it has not paid dividends to its partner, the Lesotho government, for five years.
In an interview, Econet public relations officer Puleng Litabe, claimed that the company, which launched in Lesotho in 2008, last made profits in 2014 and paid dividends in that year.
The government owns 30 percent of Econet Telecom Lesotho while the residual 70 percent of the shares are in the hands of Econet Wireless Global, owned by Strive Masiyiwa — a London-based Zimbabwean billionaire with a net worth of USD2.7-billion.
Econet has also been reported as owing the government more than M420-million in unpaid loans.
Lesotho’s mobile network market is duopolistic, with Econet and Vodacom controlling data prices.
An inspection of the two companies’ data prices highlights the burden of internet usage for poor Basotho. Both Econet and Vodacom have sharply increased their prices over the past year.
Econet charges M2 a day for 20MB plus 20MB of night data; M10 a week for 250MB plus 250MB of night data and a monthly fee of M80 for 1GB.
Vodacom is even more expensive: consumers have to cough up M2 a day for 10MB, M10 a week for 150MB and M80 a month for 750MB.
Cable, a UK-based website that compares mobile broadband rates, has released an in-depth investigation into the price of mobile data across the world conducted on October 29 2018.
This compared and analysed the price of 1GB charged by 6 313 mobile data companies in 230 countries.
Lesotho appears to be reasonably priced: cable places it 49th, with an average data price of M34.31 per GB. After Zambia, it is the cheapest country in the southern Africa region.
However, the recent changes in data prices may well have moved Lesotho from this position. The new Vodacom rates, for example, increased weekly prices from M20 for 650MB to M18 for M350MB – a 67 percent jump.
For Econet, the asymmetric digital subscriber line known as ADSL bundles last month jumped by 150 percent from 10GB for M170 to 4GB for M155.
According to the study, India offers the cheapest data prices in the world, with a price of just R3.84 per GB.
Asked about the increase, Econet’s Litabe said: “We have just simplified our voice and data packages and also introduced unlimited data contracts for new and existing customers where a top-up is no longer required.
“The new top-up bundles have been introduced so that existing customers on the limited data contracts do not go without services during the transition to unlimited contracts.
“However, more affordable top-up bundles are underway to match the existing ones.”
The Centre further undertook a comparative analysis to unpack how consumers of the two companies’ services are affected by data prices.
Econet customer Bafokeng Nape, a student from Limkokwing University of Creative Technology, relies on Econet data bundles to access his study materials on internet.
Nape said he spends M240 on data each month, as he buys three M20 data bundles a week. This amounts to M2 400 in an academic year and is equivalent to 11.3 percent of his university tuition fees.
“Due to these high costs, it sometimes becomes hard for me to purchase data every two or three days,” Nape said.
His counterpart, Abinyane Mothabeng, a student at the National University of Lesotho and a Vodacom customer, said he does not use data bundles much because there is ample wifi access at the university.
He used Vodacom data bundles mostly to source academic information on the internet.
“But the rate at which these bundles are used up is worrying,” he said, adding data prices have become too hefty after price increases.
“It is fast, there is no denying, but the cost is just too cumbersome,” Mothabeng said.
The two companies have been on the receiving end of backlash from consumers, who accuse them of unfair billing practices.
These complaints were recently echoed by LCA which warned that it would take “appropriate action … without fear or favour” against the companies’ unfair practices”, which “negatively affect Basotho”.
“The authority has recently found discrepancies in the billing of some products, charging of calls by customers to toll-free numbers and overcharging resulting from treatments of per minute or per second billing, amongst others,” LCA noted.
Econet’s Litabe rejected the accusations, saying: “We haven’t been billing our customers unfairly.”
She admitted billing mistakes happen when the systems go offline, but argued that when this happens, “we sit down with a customer and try to solve the problem”.
Explaining the penalty imposed on Vodacom for failing to pay regulatory fees for the year ended March 2019, LCA public affairs manager Tšiu Tšiu referred the Centre to the Licensing Classification and Fees rules introduced last year.
These state that Vodacom must pay fees calculated at four percent of its net operating income.
Its failure to settle its fees by November 15 had attracted another penalty which according to the same rules is calculated at “20 percent of outstanding amount”.
This was imposed in terms of section 24 of the rules, which stipulate that “the penalties … will apply in cases where a licensee fails to pay license fees on a due date or to successfully pay in accordance with the agreed payment schedule”.
Vodacom’s exact debt to the LCA is not known, however, according to LCA annual report for the financial year ended March 2018, Vodacom Lesotho paid M4.65-million in regulatory fees last year.
Vodacom’s executive head of legal, Molemo Motseki, said he was the appropriate person to comment on the penalty after questions to corporate affairs manager Mpho Brown and communications specialist Thato Mochone were not answered.
Motseki repeatedly broke his promises to respond to the questions.
Econet is not immune from controversy. The parliamentary public accounts committee (PAC) report of May 2019 disclosed that the company owes the government over M420-million in unpaid loans.
The report further emphasised the company’s long-term failure to pay dividends to government as shareholder, raising concerns of transfer pricing.
Asked to comment, Litabe said: “Not making a profit does not mean a company is making a loss. Econet is contributing greatly to the economy of Lesotho.”
Litabe said Econet’s relevance could be seen through its contribution to reduction of unemployment rate by paying salaries to over 400 workers, the provision of jobs to over 1 000 vendors, and the company’s payment of over M50-million in taxes to the government each year.
According to the PAC, government borrowed money from Exim Bank of China on two occasions to finance “Telekom National Network Phases I and II to increase network coverage and improve services”.
The government signed the loan agreements on Econet’s behalf on May 9 2008 and December 14 2011.
The PAC revealed that over eleven years, Econet had made repayments of just M14.3-million on the principal loan of M221-million for the Phase I project.
“The accumulated arrears amounted to M66.7-million and the interest paid so far is M74.5-million. The outstanding balance stands at M202.5-million,” the PAC reported.
For Phase II of the network project, the PAC noted that the principal loan made to Econet was M245.3-million, of which it had repaid only M22.6-million, while arrears stood at M34.9-million. The outstanding loan was, therefore, M222.7-million.
The PAC noted that by contrast, the government “keeps on paying this loan faithfully to the Exim Bank of China without any arrears… the government still has an outstanding loan of M276.3-million.
“The committee found this scenario of events disturbing because Econet is failing to pay the dividends and experienced sluggish repayment of the loans and the arrears,” noted the PAC.
“The company claims that it is not making profits but this is hard to believe as the Committee suspects transfer pricing practices,” the committee noted, further registering its worry that Econet’s services have not improved despite the secured loans.
Parliament has approved the committee’s report and decided that the company should “be up to date with repayments of the loan as per their loan agreement and pay their arrears within 12 months”.
Econet insisted it is still within the repayment time-frame in line with the terms and conditions of loan agreement.
“It’s a long-term loan, it cannot be settled in a short period of time. Unfortunately, this is between the lender and borrower so I cannot go deeper into the t’s & c’s but they clearly stipulate when and how to repay,” Litabe said.