eBusiness Weekly
Nelson Gahadza
Econet Wireless Zimbabwe says tariff charges applicable to all mobile network services continue to fall behind inflation because of rapid changes in the macroeconomic environment, threatening the long-term viability of the local telecoms sector.
The country’s telecommunication providers have in recent months been hiking data and voice charges regularly saying that was caused by surging operational costs and the need to increase foreign currency to import spare parts.
Tariff charges applicable to all mobile network services provided by the business are regulated by the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) based on sector-specific economic models.
“The business acknowledges the various interventions that the Regulator has granted the sector in a bid to align operating costs with revenue-generating activities.
“However, tariffs continue to fall behind inflation because of rapid changes in the macro-economic environment.
“This disparity occurs because tariffs for the sector are determined in the local currency, based on movements in inflation and in the exchange rates,” James Myers, the group’s chairman said in a statement of financials for the period ended February 28, 2023.
The economy has in recent weeks witnessed exchange rate volatility largely as a result of the significant depreciation of the ZWL against the US dollar.
Myers said this is putting significant pressure on operating costs on the backdrop of grid power load shedding challenges.
“The prevailing tariff environment is a threat to the long-term viability of the local telecoms sector and curtails the ability of the sector to invest appropriately to meet customer demand, thereby undermining the quality of service,” he said.
Earlier in the year, Potraz gave telecommunications companies the go-ahead to implement a 50 percent tariff increase, ahead of a further 50 percent price hike in April.
The regulator justified the increases saying telecommunications have been operating below profitable thresholds, despite the apparent dollarisation of mobile money transactions.
The regulator also approved a new USD tariff structure of an average of US$0,1058 per minute on voice calls, US$0,02 per SMS, and US$0,0167 per megabyte of data, beginning April 1, 2023.
According to Myers, providing quality services, which not only meet, but exceed customer expectations is at the core of the group’s endeavours.
He said while concerted efforts were made to meet these standards, efforts were continuously hampered by extensive load shedding on the national power grid.
“For the period under review, load shedding averaged 18 hours a day. Consequently, the business resorted to alternative sources of energy to power the network.
“This significantly increased our cost of providing services to our customers,” he said. He added the business also experienced vandalism on critical network infrastructure and to reduce vandalism on network equipment, the business instituted various monitoring and deterrent measures to secure the various network elements that are being targeted.
During the year under review, group revenue recorded a 20 percent rise driven by growth in voice and data usage of 19 percent and 58 percent, respectively.
The Regulator granted the sector three tariff adjustments of 61 percent each and a fourth adjustment of 50 percent during the year.
However, Myers said the tariff adjustments were not adequate to offset the increase in inflation which closed at 230 percent in January 2023.
He added, “Despite the revenue increase on account of usage, the earnings before interest, taxation, depreciation, and amortization (EBITDA) margin decreased from 52 percent to 40 percent for the year under review.”
Myers said the disparity between the revenue growth and EBITDA margin is reflective of the sub-economic tariff environment coupled with accelerated exchange rate depreciation.
The local currency lost value by more than 85 percent during the year under review which had a negative impact on overall profitability.
Myers said as the group pursues its vision of a digitally connected future that leaves no Zimbabwean behind, it will continue to innovate in order to give a unique digital experience to customers.
He said the consumption of digital services is expected to continue growing and the company has a strong platform to anchor transition to a fully-fledged digital services provider.
“We are exploiting 4G and 5G network-enabled opportunities which will be key to keeping abreast with emerging global trends and improving service delivery,” he said.
