Growing telecoms sector costs squeezing margins

By Staff reporter | 21 Dec 2018 at 12:38hrs
The growth in operating costs of the telecommunications industry outpaced growth in revenues during the third quarter of 2018, a Postal and Telecommunication Regulatory Authority of Zimbabwe (POTRAZ) industry update shows,

According to the Postal & Telecommunication Sector Performance Q3 2018 update, total sector revenue grew by 9.2% to record $435.5m from $398.8m recorded in the previous quarter. On the other hand operating costs increased by 15.3% to record 250.9m from 217.6m recorded in the previous quarter.

The regulator noted that while industry growth continues to be driven by internet and data, the growth of operating costs poses a threat to operator viability and puts pressure on prices. POTRAZ also identified illegal refiling of traffic as another threat to viability.

"With the current foreign currency shortages in the economy, coordinated effort to combat illegal refiling of traffic becomes even more pertinent to safeguard foreign currency earnings from the international voice services," POTRAZ said in statement.

POTRAZ regulates prices that industry players charge their customers and declining margins will lead to increased lobbying by industry for a review of prices.

Meanwhile, the update shows that mobile telecommunications players dominated revenues. Out of the total revenue of $435.5 million, mobile telephone revenue accounted for $331.2 million in the quarter under review from $292.9 million recorded in the second quarter of 2018, a 13.1% increase.

Growth in the mobile sector follows a 4% increase in the mobile penetration rate to reach 91.9% from 87.7% recorded in the second quarter of 2018 as well as a 7% growth in active internet subscriptions to reach 7,690,134 from 7,197,279 recorded in the second quarter of 2018.

The 4.9% growth in SMS volumes from 3,691,835 messages to 3,872,191 messages is attributable to the growing use of digital financial services as notifications are sent via SMS.

The social media application Whatsapp's bundles continue to be the main driver of internet usage accounting for 32% mobile data usage.  At 18,719TB, mobile internet and data consumption from January to September 2018 has already exceeded 15,361TB consumed in 2017.

Capital expenditure by players was mixed with fixed and mobile operators registering growth in capital expenditure, whereas capital expenditure IAPs and the postal & courier operators declined. Capital expenditure by fixed operators topped $7.09 million in the third quarter from $4.76 million, a 48.9% increase. Mobile operators increased capex spending by 57.6% from $6.2 million to $9.8 million.



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