High operating costs hit telecoms sector
LIVINGSTONE MARUFU
Players in the telecommunications industry suffered losses in the second quarter of this year, primarily as a result of a combination of high operating costs and exchange rate volatility, a new Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) report shows.
“The quarter under review was characterised by high inflationary temperatures that were felt across all the sectors. The sector operator revenues and operating costs surged by margins over 100% across all sub-sectors of the postal and telecommunications industry. Most of the operators incurred operating costs growth which was more than their revenues growth in the second quarter of 2023. This directly means that most operators made losses in the trading quarter,” POTRAZ said.
It continued: “Operator revenues, operating costs and capital expenditure grew by significant margins. However, this cannot be a true reflector of growth to the sector due to hyperinflation which was experienced in the quarter under review. Operating costs continued to spike owing to depreciation of the local currency in the second quarter of 2023. This has reduced operator profits and has had detrimental effects on the viability of the sector.”
The mobile network operators revenue shot 170.5% to ZWL$435,677bn during the second quarter from ZWL$161,07bn reported in the first quarter while operating costs increased by 110 % to ZWL$ 215,75bn during the second half from ZWL$102,768bn incurred during the first quarter.
The internet access provider (IAP) operating costs shot ZWL$224,02bn against a revenue of ZWL$191,162bn, this shows that inflation took a toll on the firms’ balance sheets.
“The growth in IAP operating costs continued to be higher than the growth in revenues, signifying reduced viability in the quarter under review. Revenue to Cost Ratio continued to fall signalling erosion of IAP operator profits. Bandwidth costs, depreciation, administration, and staff costs continued to constitute the bulk of IAP operating expenses. RCR across the sector, particularly on IAPs, continued to fall drastically in the quarter under review,” POTRAZ said.
The companies’ costs also emanated from capital expenditure which the firms used to improve networks through the building of base stations and other infrastructure.
The report said a total of 363 new base stations were deployed in the second quarter of 2023, as compared to 86 base stations deployed in the first quarter.
As the world moves towards faster technologies, the sector has been moving away from deployment of 2G and 3G technologies in favour of LTE which offers high capacity, and faster download and upload speeds. This is evidenced by 243 LTE deployments made in the quarter under review by mobile network operators. Per-operator number of mobile base stations across all technologies for the second quarter of 2023.
“As in its nature, the telecoms industry requires huge capital outlays across networks, this cannot be achieved whilst the sector operators are running losses. Investments per operator have drastically decreased due to reduced revenue to cost ratios. This situation is attributed to an eroded tariff coupled with high inflation during the trading period. In light of all the challenges that did not affect only the sector but the economy as a whole,” POTRAZ said.
POTRAZ said: “The total number of active mobile subscriptions declined by 0.7%, to reach 13,955,937, from 14,051,251 recorded in the first quarter of 2023. Hence, the mobile penetration rate declined by 0.7%, to reach 91.9%, from 92.6% recorded in the previous quarter. The total number of active Internet and data subscriptions declined by 0.2% to reach 9,902,500, from 9,920,847 recorded in the first quarter of 2023.
“The Internet penetration rate declined by 0.2% to reach 65.2%, from 65.4% recorded in the previous quarter while public switched telephone network fixed voice traffic declined by 6.5% to record 72.4m minutes in the second quarter of 2023, from 77.4m minutes recorded in the first quarter of 2023.
