Telcos ring Potraz for another tariff increase

By Staff reporter | 09 Jun 2020 at 18:31hrs
Local mobile telecommunications operators have approached the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) for another upward review of tariffs.

Earlier in March Potraz approved a tariff increase for the operators, but continued currency depreciation and inflationary pressures had pushed up operating costs for these businesses.

According to sources operators have lobbied Potraz since April for tariff increases of between 150 percent and 250 percent but the regulator is still considering the determination citing consumer protection through insulating subscribers who are facing affordability challenges. According to Telcos firms, high inflation levels are affecting the sustainability of their operations, which is compromising quality of service.

The country's largest mobile telecommunications service provider by subscribers, Econet Wireless highlighted such concerns in its latest trading update: "The regulatory tariff increases continue to lag behind inflation and have not yet factored the full impact of the exchange rate depreciation and hyperinflation.

"The company together with the other players in the industry continues to engage with the regulator to implement tariffs that sustain the viability of the sector as well as ensure that a high quality of service standard is maintained.

"Within the quarter, the interbank exchange rate increased 38 percent from $17 to $25 against the United States dollar whilst the Old Mutual implied rate increased 124 percent from 45, 6 to 102. Although the Old Mutual implied rate is not reflective of the pricing of goods in the market, it is an indicator of the distortions that exist in the market," said Econet.

"These distortions have a bearing on the cost of goods and services, including our own. The local cost of providing our services is increasing in line with market trends, where the alternative market is used for reference pricing.

"The regulator has adopted the Telecommunications Pricing Index (TPI) as the tool for setting tariffs while our costs have been increasing in line with the movements in the formal rate of exchange, albeit, with very little availability of foreign currency.

"The frequency and responsiveness to market changes have been low and slow, resulting in our real tariffs being severely undermined. This means that we are not able to pay our vendors for software licences and certain upgrades required to increase our capacity and maintain the quality of service that our customers have come to expect from us."

A source at NetOne who declined to be named said: "We understand that the regulator wants to protect consumers but for the consumer to get effective service we must be able to operate viably and if you look at the threshold set in March we are giving a megabyte for free in terms of the US dollar. "We are not prioritised on the foreign currency allocation yet most of our costs are in US dollars."

Chair of the Telecommunications Operators Association of Zimbabwe (TOAZ) Angeline Vere, confirmed that they are awaiting a determination from the regulator. Potraz is in the process of adopting the Telecommunications Pricing Index (TPI), which observers say can provide a tariff that is effective to sustain sector viability, while ensuring that consumers pay a fair price.

The Ministry of Information and Communication Technology, Postal and Courier Services has always maintained that Zimbabwe has one of the cheapest rates compared to other SADC countries in US dollar terms. Official data shows that Zimbabwe's telcos currently charge US$0,2 cents per megabyte for mobile data compared to a regional average of US$0,3c.

In regulating tariffs, Potraz is using the cost-based principle, which is the most objective criteria for determining tariffs. As a way of curbing unjustified high data tariffs, Potraz resorted to the TPI to track cost movements in the provision of telecommunication services since January 2019. Prior to that, the regulator was using the results of the Long Run Incremental Costing (LRIC) methodology to set thresholds for telecommunication services, including data tariffs.

The use of the TPI was necessitated by the need to facilitate quick decision making in cost-based principle for decisions on tariff adjustments.

The major cost items included in the computation of the TPI include: Network repair and Maintenance costs; Depreciation; Salaries and staff costs; Utilities and Administration costs; Rental costs; Fuel costs; Marketing and Advertising; Research and Development; Financing costs; Capital expenditure costs, and Foreign Exchange losses.



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