Telecommunications Sector Third Quarter Performance: Inflation and Foreign Currency Shortages Wipe Away Operators' Revenue Gains


HARARE — Inflationary pressures and foreign currency shortages continued to bedevil Zimbabwean telecoms operators in the third quarter of 2023, so much so that any nominal revenue gains have been eroded, in real terms. 

Dr. Machengete
POTRAZ Director General Dr. Machengete

This is according to a third-quarter sector performance report issued by the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) earlier today.

In the report, Director General of POTRAZ Dr. Gift Kallisto Machengete said that internet service providers' revenue grew by 138.1% to record ZWL449.3bn, from ZWL191.2bn recorded in the second quarter. Operating costs, however, rose by a relatively meagre 14.4% at ZWL256.2bn from ZWL224bn recorded in the second quarter. The report continues;

"Total mobile operator revenues grew by 95.3% to record ZWL850.8bn, from ZWL435.7 billion recorded in the previous quarter. On the other hand, operating costs grew by 99.3% tor record ZWL430bn, from ZWL215.8bn recorded in the second quarter of 2023."

However, the report noted that the growth in nominal revenues is being driven by inflationary pressures and a depreciating currency. Operators' revenue in real terms did not improve by the same margins in the quarter under review.

Bandwidth costs, depreciation, administration costs, and staff costs (which are partially paid in United States Dollars) continue to weigh down operators in the capital-intensive industry. Machengete added that Operators currently have inadequate foreign currency for investment in network expansion and upgrades. 

Machengete also highlighted a 'low disposable income' market that can barely afford the services being offered by operators and operational challenges owing to power outages as other factors affecting the viability and growth of the sector. 

Usage and Subscriptions 

The report also gave an update on the uptake and usage of telecommunications services in Zimbabwe for the third quarter.

Active mobile subscriptions rose by 6% from 13,955,937 recorded in the previous quarter to 14,794,579. This translates to a 5.6% increase in mobile penetration rate to reach 97?5% from 91.9% recorded in the second quarter of 2023. 

Furthermore, the sector recorded a 7.5% increase in the total number of active internet/data subscriptions to reach 10,647,190 from 9,902,500 recoded in the second quarter of 2023. In this regard, internet/data penetration rate increased by 4.9% to reach 70.1% from 65.2% recorded in the previous quarter. 

Internet and data usage increased by 6.2% to reach 44.67 Petabytes from 42.06 Petabytes recorded in the second quarter of 2023. Used. Incoming International Internet Bandwidth Capacity increased by 6.6% to record 339,915Mbps, from 318,742Mbps recorded in the second quarter of 2023. 

Dr. Machengete attributed this to the digitisation of businesses, e-learning adoption by the education sector, as well as the substitution effect of over-the-top media services like WhatsApp and Facebook.

The Director General also attributed this fact to the 3.3% decline in Public Switched Telephone Network (PSTN) fixed voice traffic at 70mn minutes, from 72.4mn minutes recorded in the second quarter of 2023. 

On the other hand, mobile voice traffic increased by 30.0% to record 3.29bn minutes, from 2.53bn minutes recorded in the previous quarter. 

Postal and Courier Services 

Postal and courier volumes have been on an upward trend in recent quarters, realising a 6.8% growth driven by 573,291 items from 536,896 items recorded in the second quarter of 2023. 

Total revenue generated by the postal and courier sector increased by 53.3% to record ZWL30.7bn, from ZWL20bn recoded in the second quarter of 2023, whilst operation costs increased by 50.0% to record ZWL32.8bn, from 21.9bn recorded in the second quarter of 2023. 

Looking Forward 

Dr Machengete expressed confidence in a positive trajectory for the sector, owing it to the increasing need for businesses to undergo digital transformation. 

He expected the recently gazetted tariff reviews to improve revenue-to-cost ratios of operators, thereby increasing their investment in coverage and service quality. 

Dr. Machengete hoped that the ongoing contractionary monetary and fiscal policies would stabilise the macroeconomic environment, which is necessary to facilitate investment in the sector. 

Dr Machengete concluded the report by urging authorities to establish initiatives aimed at promoting local online content creators so as to encourage service uptake. 

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