Tariff increases unsettle Zimbabwe telecommunications firms


As consumers in Zimbabwe come to terms with the price increase on mobile services, telecommunications companies are concerned over the impact this will have on the use of their networks and related services.

Local mobile companies and internet service providers, including ZOL Zimbabwe and state-run TelOne, have hiked data and voice tariffs to match increases in foreign currency rates in the country.

Businesses have witnessed a drop in demand for services owing to inflationary pressures.

In its Zimbabwe Third Quarter 2019 Equity Strategy report, analysts at brokerage and advisory firm IH Securities said that telecom companies are expected to be the least affected by the tariff increases passed on to consumers.

At the same time, they say operators will likely feel the effect on traffic and usage - although the impact will likely be minimal.

"The telecoms sector has affected several tariff reviews during the year, resulting in a slight decline in traffic and usage. The decline is expected to be relatively low as services, such as data, have become a necessity to society, therefore evolving into somewhat a utility," noted IH Securities.

According to a 2019 second quarter telecom industry report by the Posts and Telecommunications Regulatory Authority of Zimbabwe (Potraz), ".... total revenue for the mobile network operators grew by 50.1% to ZWL375-million for the second quarter."

An excerpt from the report reads: "The overall growth in mobile revenue may be attributable to the increase in tariffs in the quarter under review as well as the transition from the multi-currency era, as some foreign currency denominated income is now subjected to conversion at the official exchange rate."

It adds that operating costs grew by 25.7% to ZWL233.6-million for the same period, due to "inflationary pressures in the economy" that have forced operators to implement "cost containment measures" in order to suppress escalating costs.

Banks have also been adjusting fees for Point of Sale, internet and digital transactions as businesses look to deflect inflationary pressures onto consumers.

IH Securities added that Zimbabwean "banks have started to leverage technology to grow the non-funded income contribution to their earnings."

However, "shifting from traditional banking will initially result in significant capital outlays for the banks that are yet to migrate to technology driven banking" models.