RISING operational costs weighed down Zimbabwe’s mobile telecommunications companies, with the foreign currency requirements generally recording the biggest jump in expenses, prompting the regulator to grant them the greenlight to charge for services in foreign currency, or in the local currency adjusted at the rate of the day.
Although latest statistics from the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) show that total mobile network revenue grew by 45.8 percent to record $3 billion in the quarter to June 30, 2020 from the previous quarter, the jump in costs was more significant.
The growth in revenue was due to the increase in tariffs as well as the growth in internet and data usage following Covid-19 outbreak. Operating costs exclusive of foreign currency losses grew by 42 percent but when factoring in operating costs inclusive of foreign currency, losses jumped by 217.7 percent.
“The increase in operating expenditure is attributable to the inflationary operating environment,” said POTRAZ.
“The telecommunications sector is also capital intensive and heavily reliant on debt financing, the fluctuations in the exchange rate have resulted in huge exchange losses on debts to be serviced.”
In a move aimed at helping the mobile telecommunications companies to remain viable, POTRAZ has since given them “the go-ahead to charge for their services in foreign currency, or in the local currency adjusted at the foreign currency exchange rate of the day.”
But the upward adjustment in voice tariffs in particular resulted in the decline of the voice segment’s contribution to the sectors’ bottom line.
Total mobile voice traffic declined by 1.2 percent to record 1.31 billion minutes from 1.33 billion minutes, during the quarter under review.
“Unlike the fixed network, voice service is still the biggest contributor to the bottom line of mobile operators.
“However, in the quarter under review, the contribution of voice declined in line with the decline in mobile voice traffic,” said the regulator.
On a positive note, mobile internet and data traffic increased by 56.2 percent to record 10,407 terabytes (TB) from 6,661TB, as the sector benefitted from the Covid-19 pandemic that has necessitated the increased use of online services and working-from-home routines.
The regulator expects internet and data traffic to “continue to grow due to the increased adoption of e-learning, telecommuting, and e-conferencing”.
With the increase in voice charges, local mobile telecommunication consumers have also been inevitably substituting voice service with cheaper Over-the-Top services such as WhatsApp.
Meanwhile, the jump in costs perhaps contributed to lower investment by the telcos as capital expenditure by the mobile operators declined by 17.2 percent to record $74,059,483 in the second quarter of 2020 from $89,455,678 recorded in the first quarter of 2020.