Potraz approves US$ headline, bundle tariffs adjustments

BUSINESS REPORTER

The Postal and Telecommunications Regulatory Authority (Potraz) has approved an industry-wide US dollar headline and bundle tariff review, effective April 1, to allow the sector’s players to invest in much-needed infrastructure to expand and upgrade their networks.

The Potraz-approved USD tariff review follows an ZWL price adjustment granted back in February, to cushion the telecom operators against inflation. It was staggered between February and April.

The new USD tariff structure, seen by this publication, will see customers start paying 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.

Over 90% of the telecommunication industry’s costs are in US$. These include capital for network expansion and upgrades and operational costs towards maintenance, power and licence fees, among others.

The industry also currently carries a multibillion-dollar US dollar-denominated legacy debt, as it battles a weakening local currency along with scarce foreign currency.

As a result, Zimbabwe’s telecommunication companies have, over the past five years, significantly lagged their regional counterparts in infrastructure investment, averaging between 1- 5% where their regional peers have been investing between 15 to 20% in network infrastructure.

“That’s why we have often had issues with network quality and even congestion. Investment in infrastructure continues to lag behind demand for telecom products and services, especially in light of emerging new use cases, most of which are very data-hungry,” said a telecommunication executive who preferred anonymity.

Analysts say despite the latest price intervention, telecom tariffs in Zimbabwe remain at levels that largely threaten the viability of the sector.

“It is important to note that despite the various price interventions made in the last few months, tariffs in Zimbabwe are still not at the correct level, given the costs that the telcos have carry. To break even, I believe the industry needs further tariff correction, particularly to support ongoing investments in the sector, that are already lagging behind,” said a data analyst from a local telecommunications company.

Between 2009 and 2014, mobile network operators charged at least US$0.23 per minute. The optimum tariffs at the time allowed telecommunication companies to rapidly expand networks across the country and improved quality of service.

“You will notice much of the significant capital investments where made around that time – between 2010 and 2016,” the analyst said.

The current tariffs, which averaged around US$0.03 per minute in the last few years, have negatively impacted investments in the sector, as telcos struggle to both service legacy debt and at the same time keep up with current demand amid shortages of foreign currency and soaring inflation.

“Foreign currency shortages have therefore seen most companies fail to pay for new equipment and software from international vendors, for critical expansion and network upgrades, amid rising demand,” the telecom executive, who requested anonymity, said.

Economic analyst Francis Mukora said the new tariff adjustments are expected to support continued investments in the sector, as well as counterbalance the high cost of diesel needed to power base stations at a time when the country is experiencing serious power shortages, lasting up to 15 hours a day.

“In the current environment it is very difficult for telecommunication companies to sustain operations that require running diesel generators for 14-18 hours every day, which need fortnightly servicing, without enough foreign currency,” he said.

Mukora indicated that telcos currently require more than 10 times the level of diesel they normally use to provide uninterrupted service across the country, a situation which he said is untenable.

“The current electricity shortages mean that some base stations are at times not operating, resulting in poor service availability and frequent dropped calls as demand outstrips available capacity,” he said.

Meanwhile Econet, recently noted that the pace of investment had remained below desired levels, thereby impacting service quality. Last year, the company became the first in the country to roll out a high-speed 5G network,.

“Although the business continued to witness an increase in demand for its services, foreign currency availability for servicing our foreign suppliers has continued to be a major challenge and has hampered our ability to implement much needed network maintenance expansion,” the company said in its third quarter update released in February.

“Overall, the local telecommunications industry has been struggling to meet the capacity and coverage demands of consumers as investment is long overdue. Capacity enhancements and routine maintenance has remained severely constrained by the lack of access to foreign currency to service our foreign network suppliers.”