Business

Doom for mobile networks as revenues plummet

TAURAI MANGUDHLA

At face value, any business would be pleased to operate in an industry where sector revenues grow 121% quarterly, but that is not the case for Zimbabwe’s mobile network operators Econet Wireless Zimbabwe (Econet), NetOne and Telecel Zimbabwe (Telecel).

Industry regulator Potraz’s third quarter report for 2019 shows revenues grew 121% to ZWL$828m.

 In USD terms this is merely US$54.5m using the interbank exchange rate which stood at 15.2 on September 30, 2019 being the close of the reporting period.

Currently the exchange rate is at 16.88 on Tuesday.

Compared to the third quarter of 2018 when the US dollar was still the currency in use, the revenue fell by 83.5%, effectively reducing capacity of players to retool and upgrade equipment in a capital intensive industry.

As a result, the 8% increase in national mobile voice traffic during the reporting period from 1.3 billion minutes to 1.4 billion minutes is on paper as operators did not see it reflect on their bottom line in real terms.

According to Potraz’s 2018 third quarter report, the industry registered a 13% increase in mobile telephone revenue from US$292.9m recorded in the second quarter of 2018 to reach US$331.2m.

In the third quarter of 2018, mobile network operators generated a total of US$331.2m in the representing a 13.1% growth in revenue from US$292.9m recorded in the second quarter of 2018.

A huge chunk of that 121% revenue growth is eroded by inflation as the local currency, hurriedly introduced in June to 2019 to end a decade-long multiple currency regime dominated by the United States Dollar, weakens.

Inflationary pressures saw the industry’s aggregate operating costs growing 202.7% to US$707.4m.

 Same period in 2018, operating costs operating costs increased by 24.7% to record US$166.5m from US$133.5m recorded in the previous quarter.

In the period under review, Potraz said active mobile subscriptions grew by 4% from 12.4m to 12.9m; hence the mobile penetration rate increased by 3.4 percentage points from 84.8% to 88.2%.

International outgoing mobile voice traffic declined by 39.3% from 13,622,129 to 8,262,022 minutes; while international incoming traffic declined by 0.7% from 36,222,428 to 35,970,868 minutes.

“The decline in outgoing international voice calls by almost 40 percent comes as subscribers struggle to afford the new tariffs.

“International voice tariffs have been gradually increasing, hence the inevitable substitution of international voice calls with cheaper Overthe-Top services such as WhatsApp, Viber and Skype amongst others,” Potraz said.

A quarterly comparison shows that the aggregate average revenue per user increased by 96.5% to record ZWL$15.35 from ZWL$7.81 recorded in the previous quarter; the average cost per user increased by 91.5% to record ZWL$10.19 from ZWL$5.32; the average minutes per user also increased by 108,1% to record ZWL$5.16 from ZWL$2.48 recorded in the previous quarter.

Potraz said the prevailing economic environment has negatively impacted on the performance of the sector in terms of service demand and consumption levels, operating costs and investment.

“Given the current inflationary pressures in the economy, operational cost containment will be even more crucial for operators to maintain profitability.

The growth in operating costs poses a threat to operator viability and puts pressure on prices,” Potraz said.

“This may in turn impact demand for postal and telecommunication services as consumers reduce usage.

The incessant power supply challenges have negatively affected the sector in terms of service provision, lost potential revenue and increased costs brought about by the use of alternative power sources like generators, in an environment of rising fuel costs.

“Data and internet services will continue to drive industry growth; however demand levels for fixed broadband at household level may be negatively impacted by the rising prices.

The use of Over-the-Top services, such as WhatsApp, Skype and Viber, is expected to grow as consumers cut back on communication expenditure,” Potraz said.

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