Mobile network operators face losses as costs mount

By Staff reporter | 26 Apr 2020 at 18:40hrs
The unprecedented rise in the country's cost of doing business is expected to wipe out margins for mobile network operators, leading to possible losses within the sector.

Between March and now, prices of goods and services have skyrocketed while mobile tariffs, which are controlled by the Postal and Telecommunication Regulatory Authority of Zimbabwe (Potraz) have remained at their last adjustment levels made early March.

The three main operators in Zimbabwe are Econet Wireless, NetOne and Telecel.

The price hikes, which are largely tracking the exchange rate, resulted in Government having to intervene through the controversial price freeze for basic commodities.

Said Vice President Kembo Mohadi in announcing the price freeze:

"There was a general agreement among multi-sectorial partners that price increases, particularly during the lockdown period, were speculative and unjustified.

"So the multi-sectorial stakeholders committed to a price moratorium based on the prices which were applicable on the 25th of March 2020," said VP Mohadi.

This was after prices had gone up by an average 42%.

No intervention was however made in the key cost components for telecom companies.

Instead, the period under review saw power utility ZETDC announce an increase in electricity tariffs.

According to ZETDC, 200 units of electricity, which used to be sold for $157, will now cost $162, 50.

Once the first 200 units are consumed, all other units will now go for a punitive $4,61 per kilowatt hour compared to $3,87 per kWh before.

In the absence of electricity, telcos often resort to the use of diesel to power base stations but the price of the commodity also went up to $21, 52 from $18,66 per litre.

Most prices in the country are tracking the exchange rate leaving MNOs to contend with high rental costs for offices and base stations.

The costs of vehicle and generator maintenance, key enablers for network uptime, has also gone up given the increased usage during the COVID-19 induced lockdown and social distancing.

The price hikes are likely to push up the operating costs for MNOs that also have to meet foreign obligations.

The bulk of the software and hardware used by MNOs, including licences and computers is imported and the falling exchange rate means players will have to fork out more to access foreign currency which is mostly found on the parallel market where the exchange rate has depreciated from $35:US$1 to $50:US$1.

Between early March and now, the official exchange rate has also lost depreciated to $25 for every US$1 from around $18.

At the last tariff review, Potraz Director General Gift Machengete acknowledged that the then tariffs had been "rendered unsustainable as the operating environment continues to deteriorate due to constantly rising operating costs."

Since then operating costs have continued to escalate rendering the last tariff adjustment unsustainable again.



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