ECONET Wireless, Zimbabwe’s largest mobile network operator says the current tariff structure is a threat to long-term viability of the local telecoms sector.
In the group’s annual report for 2023, chairman James Myers acknowledged various interventions granted by the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) in a bid to align operating costs with revenue generating activities.
“However, tariffs continue to fall behind inflation because of rapid changes in the macro-economic environment. This disparity occurs because tariffs for the sector are determined in the local currency, based on movements in inflation and in the exchange rates.
“This put significant pressure on operating costs on the backdrop of grid power load shedding challenges. The prevailing tariff environment … curtails the ability of the sector to invest appropriately to meet customer demand, thereby undermining the quality of service,” Myers said.
Group revenue recorded a 20 percent rise driven by growth in voice and data usage of 19 percent and 58 percent, respectively. The regulator granted the sector three tariff adjustments of 61 percent each and a fourth adjustment of 50 percent during the year. The tariff adjustments were not adequate to offset the increase in inflation, which closed at 230 percent in January 2023. Despite the revenue increase on account of usage, the earnings before interest, taxation, depreciation, and amortisation (EBITDA) margin decreased from 52 percent to 40 percent for the year under review.
“The disparity between the revenue growth and EBITDA margin is reflective of the sub-economic tariff environment coupled with accelerated exchange rate depreciation. The local currency lost value by more than 85 percent during the year under review, which had a negative impact on overall profitability. The group incurred exchange losses of $77 billion, which translated to 23 percent of revenue against a prior year comparative rate of six percent of revenue,” Myers said.
Econet Zimbabwe chief executive Douglas Mboweni pointed out that mobile operators’ operating costs had outstripped the increase in aggregate revenue for a long period of time.
“A situation that is untenable for the viability of the sector. This is reflective of a tariff environment which is not consistent with inflation trends in the economy,” Mboweni said.