Mobile network giant Econet, which in December reported half-year results weighed down by exchange rate losses, published a trading update earlier in January that said the company’s current tariffs were at “sub-economic levels”.
While the company did not share details on its revenue performance, the decline in traffic volumes across the board, at the reported sub-economic tariff levels, means that revenues might come out lower than expected at its full financial year end, putting pressure on the business’s ability to meet associated costs of operations.
Traffic volumes for the third quarter to October 2019 declined across from the previous quarter, with voice traffic down 8%, data traffic down 30% and SMS traffic down 35%.
“Our tariff continues to lag behind inflation and given the rapid local currency depreciation since February 2019, the tariffs are now at sub-economic levels,” read the quarterly performance update.
The situation is not peculiar to Econet though, Telecel has since pleaded with authorities to adjust tariffs in line with inflation, which is estimated to have reached 521% by December 2019.
Prices of most basic commodities have been going up with bread, which cost Z$15,17 in October, now costing Z$18,70. Cooking oil, flour and sugar, among basic commodities, have also seen significant price hikes as manufacturers seek to stay afloat amid rising input costs.
Likewise, Econet and Telecel said they would continue engaging authorities in an effort to obtain a tariff regime that will ensure continued viability of the sector.
Telecel said in a statement: “The company and other industry stakeholders continue to engage all relevant authorities to ensure that tariffs are adjusted in line with cost-movement of basic operational costs.”
In December 2019, NetOne chief executive Lazarus Muchenje was quoted saying “costs are rising at a higher rate than our revenue generation capacity”.
“The recent power outages have resulted in hundreds of our base stations being powered by generators, which has increased our fuel consumption,” he said.
The operational costs are exacerbated by erratic power supplies forcing companies to turn to the expensive and not readily available diesel to power base stations.
Erratic grid power supply and escalating fuel costs significantly impacted Econet’s base stations running costs during the period under review which speaks to the need for economic tariffs.
Since October, when mobile network operators got their last tariff adjustments, the price of diesel has gone up several times from Z$17,49 to Z$19,55.
Sub-economic tariffs in a weakening Zimbabwe dollar environment have been putting a constrain on the mobile and telecoms companies’ investment outlay, which is critical for the technology-driven companies.
Since October, the official exchange rate has weakened from 15.7 to around 17.5 to the US dollar, making it difficult for local companies to make critical imports.
A falling exchange rate against static tariffs means businesses have to make more sales to get US dollar values for critical imports.