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Telecoms face crisis as overheads outpace revenues

BY TAURAI MANGUDHLA

ZIMBABWE’S telecommunication firms are grappling with a dicey situation, with overheads shooting at a faster pace than revenues during the fourth quarter of 2020, according to Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) data released on Thursday.

The country’s telecoms space consists of three mobile network operators — the Zimbabwe Stock Exchange-listed Econet, together with two state-run entities
NetOne and Telecel Zimbabwe.

TelOne, another state firm, operates in the fixed network space.

Potraz’s fourth quarter report for 2020 revealed a tricky situation for the industry, which had to grapple with diminished voice volumes as people were confined to their home to prevent contagion as the Covid-19 pandemic spread in the final quarters of the year.

However, inflationary pressures continued building up as the domestic currency struggled, driving overheads northwards.

“Total mobile operator revenues grew by 37,5% to record $12,3 billion from $8,94 billion. On the other hand, mobile network operating costs grew by 125,5% to record $5,7 billion from $2,5 billion recorded in the previous quarter,” Potraz said.

“Revenue generated by the fixed telephone network grew by 41,7% to record $1,4 billion from $990,4 million. On the other hand, fixed network operating costs increased by 761% to record $1,37 billion from $775,2 million recorded in the previous quarter,” said the report.

It was a tricky situation that could throw weaker operators into a crisis, unless inflationary pressures ease while disposable incomes improve.

Mobile operators’ revenues grew by 37,5% during the period to reach $12,3 billion from $8,94 billion during the previous quarter.

On the other hand, operating costs grew by 125,5% to record $5,7 billion from the $2,5 billion that the firms had spent the previous quarter.

The players’ plight was compounded by a weakening currency, which made it difficult to set sustainable tariffs.

The telecoms sector incurs most of its overheads in foreign currency, but revenues pegged in the fast depreciating Zimbabwe dollar.

“Staff costs, depreciation and bandwidth costs constituted the bulk of mobile network operating costs,” Potraz said in the report.

“Capital expenditure by the mobile operators in the fourth quarter of 2020 was $74 794 610. This is a marked growth from $777 643 invested in the third quarter of 2020. The investment was mainly in national transmission, as well as computer hardware and software,” said Potraz.

Revenues generated by the fixed telephone network grew by 41,7% to $1,4 billion from $990,4 million during the third quarter, while fixed network operating costs increased by 76,1% to $1,37 billion.

This figure was $775,2 million during the previous quarter.

The report said data had become the main revenue contributor for the fixed network at 64,5% of revenues compared to 62% the previously.

“The increased adoption of e-learning and telecommuting has resulted in increased data consumption and revenues, therefrom,” Potraz said.

Internet access providers’ revenues grew by 59,5% to $4,6 billion from $2,9 billion previously, while their total operating costs grew by 31,6% to $2,5 billion from $1,9 billion during the third quarter.

Potraz said active fixed telephone lines declined by 1,7% to 252 067 from 256 356.

The fixed tele-density declined by 0,1% to reach 1,7% from 1,8%.

The total number of active mobile subscriptions increased by 3,2% during the period under review to 13 191 708 from 12 783 785, hence, the mobile penetration rate increased by 2,8% to reach 90,5% from 87,7% recorded in the previous quarter.

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