Zim braces for tariff hike as players raise red flag

Tinashe Makichi

Zimbabwe’s telecoms regulator has said it is still considering a proposal made by the country’s three mobile phone operators to increase tariffs.

Rising inflation which accelerated last year and a weakening local currency has seen most companies reviewing their pricing structures to match economic developments.

Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) director general Gift Machengete the authority is yet to make a determination on the applications made by telecommunication companies.

Machengete said Potraz has not approved any local tariff increases for voice and internet as well as data services but a position will be communicated soon.

“In making a determination on the proposals made by telecommunication companies to increase tariffs, the authority’s position is definitely going to be informed by the economic situation in general,” Machengete said.

“We have not approved any local tariff increases; we are still looking at the matter. Telecommunication companies have made their applications but we have not yet approved anything at the moment. As you are aware we did not have a board but we have a board in place now.”

On sector performance, total postal and telecommunications revenue for financial year ending December 2018 was 40 percent up recording $1,5 billion from $1,1 billion recorded in 2017 on the back of growth in mobile data and internet services as well as mobile revenue growth.

Between 2012 and 2018, data traffic grew from 29 million megabytes to 27 billion megabytes. At $1,155 million, mobile revenue was 36 percent above prior year which recorded $0,849 million on the back of growth in voice traffic. Total voice traffic grew 20 percent to 5,3 billion minutes.

 “The growth in voice traffic in 2018 is attributable to the 45,1 percent growth in on-net traffic because of promotions offering bonus minutes for calls within the same network,” Potraz said in its report.

Fixed voice traffic During the period under review, short messaging service (SMS) volumes grew 31,2 percent to 14,3 million on the back of growing use of digital financial services as notifications are sent via SMS.

Machengete while making a presentation said postal and courier has been a problem child which recorded a 13,9 percent decline in revenues to $35 million compared to $40 million recorded in 2017.

According to the report, internet penetration maintained an upward trend since 2009 reaching 62,9 percent from  5,1 percent.

Machengete noted that internet penetration rate has been consistently increasing due to the growing demand for internet and data services.

Demand for internet and data services in the country is expected to continue growing as the internet coverage, variety of services and the availability and accessibility of devices improves.

Total capital expenditure for the year was down 18 percent to $160 million as the obtaining economic challenges characterized by foreign currency challenges took its toll on the sector.

On a quarterly basis, fixed voice traffic declined 3,3 percent during the fourth quarter of 2018 to 113 million minutes from 116,8 million minutes recorded in the previous quarter.

Fixed telephone revenue increased 9,8 percent to $38 million mobile telephone revenue declined 13,3 percent to $287 million.

Active mobile subscriptions increased 1,3 in the quarter to record 12 908 992 from 12 748 551 recorded in the third quarter of 2018.

The mobile penetration rate increased 1,2 percent to reach 93,1 percent from 91,9 percent recorded in the third quarter of 2018.

On the current inflationary pressures, Machengete noted that most companies have been facing challenges on their viability as well as addressing their costs.

 “The current inflationary pressures in the economy pose a threat to operator viability and puts pressure on prices. This may in turn impact demand for postal and telecommunication services as consumers reduce usage”.

Data and internet services are expected to continue to drive industry growth, exceeding the revenue contribution of voice service.

On the outlook, Machengete noted that the decline in postal volumes is expected to continue to decline with the reason being the decline in letter volumes which have since been substituted by electronic innovations.