Telecoms sector, let's pay attention

By Kudzanai Sharara | 12 Jul 2019 at 18:56hrs
Potraz
The latest telecoms sector statistics, released by the Postal & Telecommunications Regulatory Authority of Zimbabwe (Potraz), for the first quarter to April 2019, should make worrying reading for all Zimbabweans and in particular authorities and policy makers.

The numbers showed that for the first time in many years, all players in the sector recorded a 6 percent drop in active mobile subscriptions to 12 134 455 from 12 908 992.

This was in addition to a marked decline of 9,8 percent in the mobile penetration rate to 83,3 percent from 93,1 percent.

The last time there was an overall drop was when Potraz ordered operators to disconnect all inactive subscribers.

While Potraz attributes the decline in active mobile subscriptions to the general depressed demand in the economy and the end to a number of promotions, there is more than what meets the eye.

But first let's look at other telling numbers which reflects an industry under siege.

The sector witnessed a 4 percent decline in mobile voice traffic from 1,467 billion to 1,404 billion minutes; as well as a significant decline in mobile telephone revenue of 13 percent to $249,9 million from $287 million comparably.  This is at a time most businesses are still recording revenue growth despite falling sales numbers.

Even more worrying is the drop in the "future of communication", data traffic, as active internet subscriptions declined by 3,3 percent to reach 8,4 million from 8,7 million, resulting in the Internet penetration rate dropping by 5 percent to reach 57,9 percent from 62,9 percent.

Data and internet services are supposed to take over as the main driver for the sector growth and falling numbers is not what we should expect.

The above numbers are, however, a reflection of a more worrying figure, that of falling investment on infrastructure.

The mobile operators recorded an overall 22,1 percent decline in capital expenditure in the quarter under review to $22 978 234 from $29 501 279. To keep up with new technologies such as 4G/LTE, Fibre to the Home (FTTH), ADSL and other forms of broadband access technologies, there is need for players to be able to invest in capex, but unfortunately we are seeing a reversal as the viability of telecoms companies, amid falling revenues and suboptimal tariffs, is under threat.

While broadband availability is improving, 3G as well as 4G connectivity are yet to be ubiquitous, signalling the need for further investment. Mobile money services are also expected to continue playing a key role of bridging the financial divide by providing safe, secure and cheap financial services in areas where many Zimbabweans have no access to formal banking systems, but with little investment, that gap will continue to widen.

A threat to 4th industrial revolution
The significance of a functional and efficient mobile and data network sector cannot be overemphasised as it is the back bone of the next era of the global and digital economy. Much of this new era of economic development will rely on the Internet of Things and smart devices. Advances in technology and the rise of the Internet of Things has transformed industries across all sectors — from smart cities to artificial intelligence, every industry is becoming more dynamic and personalised. The fourth industrial revolution is an incredible opportunity to generate economic growth and address humanitarian challenges we see in our world today.

However, while this new era in the global economy ensures rapid change and innovation, one thing will be constant: Connectivity will be an essential requirement for participation, with mobile platform to deliver economic growth and expand the benefits of the digital economy to all.

While mobile's crucial role in driving the fourth industrial revolution is already evident, it will take connectivity to empower individuals and entire industries to innovate and create value.

Connectivity will also expand the reach of who is able to participate in the new economy. It is thus important to address the evident barriers to connectivity.

Sub-economic tariffs, margins under pressure
The telecoms industry is one of those industries that has been significantly hard done by the introduction of Statutory Instrument 142 of 2019. The move, which saw the value of the local dollar weaken to an exchange rate of 1:9 from 1:2.5 has meant the mobile tariffs approved in March when the exchange rate was 1:3 are now sub-economic.

At current tariffs, telecoms players will find it difficult to buy foreign currency even on the formal market. Add to that, the ongoing power cuts, with limited availability of diesel and you can see a sector that is on the brink.

While other metrics are pointing south, the substantial increase in mobile internet/data usage by 19,2 percent from 8 559TB to 10 202TB is an indication that users are getting the product cheap, but at what expense.

We risk having another ZESA in the telecoms sector, a black out.

For an industry that relies heavily on imported and ever changing software and hardware components, the availability and affordability of foreign currency is crucial.

Granted the country is going through a crippling foreign currency shortage, but the situation could have been worse if telcos had not invested in platforms that enable Zimbabweans to transact.

The Government and the Reserve Bank of Zimbabwe must always act to safeguard the evolution of Zimbabwe's digital economy. Viable tariffs should be a matter of urgency and just like fuel prices and electricity charges, a mobile tariff review is long overdue. The Government should come up with policies that make sure that operators are not challenged to deliver on service, which is a critical element for Zimbabwe's digital growth and financial inclusion.

This will allow companies to focus on core business and for telcos, focus would be on sharpening digitalisation, innovation and not be hindered by lack of foreign currency.

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