125% data cost hikes in 3 months

Zim Now Writer

Zimbabwean telecommunications companies are set for another round of 50% tariff reviews on April 1, 2023, as they battle with rising operational costs.

This comes as they effected a similar tariff adjustment in February that was approved by the industry’s regulator, the Postal and Telecommunications Regulatory Authority of Zimbabwe.

Effectively this means data costs will have gone up by more than 125 percent in less than two months.

A data package that cost US$ 100 in January went up to US$150 on the first hike and will now jump to US$225 or more with transactional costs.

The sector players say they are facing serious operational hurdles, primarily due to rising costs linked to high interest rates, shortages of foreign currency needed for capital investment, vandalism, load shedding and high diesel fuel charges.

An industry expert said the telecommunications sector should address the rising costs and secure the sector’s sustainability going forward.

“Confronted with an inflation rate of nearly 100% and increased cases of load-shedding, telcos that fail to act will struggle to survive, let alone make profits. And as the inflation and electricity shortages trends continue, the situation is likely to get worse, with even bigger losses if quick action is not taken,” South Africa-based telecoms expert Gerald Pasipanodya said.

Zimbabwe now uses a “blended average” of Zimbabwean dollar and USD prices in measuring inflation, the country’s annual inflation rate, which stood at 92,3% in February, is still one of the highest in the world.

The incessant load-shedding – lasting up to 16 hours a day – has increased the cost of doing business as telecom companies resort to diesel-powered generators to maintain operations and keep their services up and available for their customers.

At an average cost of US$1,70 per litre, Zimbabwe has one of the highest diesel prices in the world, compared to US$1,17 in South Africa, US$1,18 in Botswana, US$1,20 in Lesotho and US$1,30 in Zambia.

Pasipanodya added today’s economic and inflationary trends make it difficult for cost-efficiency initiatives alone to adequately address the issue of rapidly rising costs and maintain profitability.

“As a result, price increases are necessary to keep the companies operating sustainably,” Pasipanodya said.

He added that a healthy and stable telecom sector – the foundation of a country’s digital ecosystem – fuels virtually all other sectors of the economy and is a prerequisite for consistent improvement in service quality for users.

In an effort to address some of the challenges in the sector, the Telecommunications Operators Association of Zimbabwe recently petitioned Parliament seeking relief to peg tariffs in US dollars to protect them from value erosion through hyperinflation.

This followed Potraz director-general Gift Machengete’s indication in February that low-cost tariffs were hindering telcos from investing in network infrastructure development.

“The current tariff thresholds for telecommunication services were last adjusted in November 2022, using the Telecommunication Price Index movements for the period October 2021- June 2022.

“Owing to dynamics in the economy in general, characterised by depreciation of the local currency, general price movements and usage patterns, it has become necessary to review charges for the telecommunication sector,” he said.

Mobile Network Operators in the region and in other parts of Africa borrow funds for network expansion at much cheaper rates than their counterparts in Zimbabwe.

Telecel Zimbabwe has struggled to expand its network due to lack of access to cheap loans, while NetOne has often had to depend on government to guarantee its borrowings.

Econet, on the other hand, has had to resort to issuing debentures valued at US$128 million to service its external debts that had been secured to finance network expansion.