Things Falling Apart In Zim, Telecoms Sector is on Fire!

The sky is falling, while people are laughing, forgetting that they are earth habitats as well!

Whether or not we should hit the panic button now is a subjective matter, but the fact is things are falling apart, worse things may happen if we do not have a national policy to stop this gravy train which is hitting a dead end soon.

Gift Chirauro and Toneo Tonderai Rutsito

Telecel Zimbabwe has already announced that they want to pay atleast 20% via juice cards, while other operators may not have announced any cost cutting measures, only time may tell when can hold on as we are about to face an unprecedented era.

Econet, Zimbabwe`s second largest tax payer, has become the first mobile operator to announce contract terminations, whether or not they want to quickly do this before presidential powers are invoked to stop the mass job losses emanating from the latest high court ruling, is another story alleged an analyst in the business.

If this letter doing rounds on social network is anything to go by then, like the Biblical job” the thing i feared worst has come upon us!”

The company which heavily invested on borrowed loans in anticipation that it it will recover the costs through high voice tariffs suffered a major high court decision and today it has no option but cut costs if at all it needs to survive.

They recently announced their salary cuts across board by at least 35%, a move which they hope will make them more sustainable. Econet however went on to appealing to its suppliers to also cut their supply bills by 35% to match the corresponding market depression a Zimbabwe`s Telecoms sector faces its worst performing season.

It only got worse when government introduced 70% dip in returns caused by 5 percent excise duty on airtime sales, a 25 percent duty on handsets and ICT products and a 5 cents levy per transaction on mobile money transfers, compounded by a 35 percent voice tariff reduction.

Yes we celebrated the tariff cuts because this makes access to information a reality but the effects of other burdensome taxes will surely not haunt Econet alone and this is why we should be worried as a nation, just before we allow the sky to fall on us.

Government will be earliest victim meaning the tax charges will greatly shrink, and when that happens, it means whatever they had in fiscuss to deliver to the nation is now limited since the revenues have already reduced and this goes down to even affect civil servants indirectly or directly, but the pinch is going to be significant.

The next person is your brother or sister who already may have received marching orders to stop coming to work due as we are about to see mass contract terminations, a move which will directly affect the laughing friends and families as we now officially add up numbers to the unemployed brackets.

Companies which have been supplying whatsoever to Econet and other operators are already facing serious viability problems as they are either facing serious payment delays, or termination of service provision as everyone today is now talking of cost cutting.

The Zimbabwean economy has been facing a lot of challenges, from low investment to company closures, and this has affected the mobile telecommunications industry which has witnessed the decline in revenue. Biggest players like Econet Wireless are failing to withstand the heat there-by relaying the burden to the ordinary subscriber.

According to the annual financial results for local mobile operator Econet Wireless released in May, the firm published revenue losses and they were quick to blame the operating environment. Because of a pattern of declining earnings, there has been a slump in revenue brought about by a host of factors in the Zimbabwean business environment.

In May 2015, Econet published its financial statement which showed its revenues dwindling from $753 million to $746 million, with earnings before interest dropping by almost 14% to rest at $286 million. Profits after tax stood at $70 million, representing a 41% decline from the previous year’s figure of $119, 4 million. This alone shows the beginning of a problematic era.

Infact if we are to use the overall figures in the sector, the shocking truth will be that Econet is the worst performing Telecommunications company against their investments figure compared to returns, things could even have been worse.

Several theories has emerged to try and come up with reasons to the decline. Some, especially from the telecoms giant, suggested that the feet of regulatory intervention such as the reduced voice tariffs, taxes on airtime and excise duty of phones has impacted on the operations of the company thereby affecting immensely on its revenue base.
And this has not gone without a reactive stunt.

Recently Econet announced the slash of workers’ salaries, probably a move towards coming to terms with the crumbling revenue base. The giant slashed the salaries by 35% across the board and these cuts affected its subsidiaries Steward Bank, Mutare Bottling and Liquid Telecoms. The tariffs cut coupled with depressed economy and also huge capital investments have made the company to settle for salary cuts.

As pressure continue mounting on Econet, it shifted from the worker to the local and international suppliers by demanding a 15% discount on every supply they make. The measures, which are part of Econet’s cost cutting drive will however affect all suppliers of goods and services.

Econet’s success has been riding on the market share where subscribers who had no option but to continue with their loyalty to this sector bully. With the Postal Telecommunications Regulatory Authority put in place by the government to regulate the telecommunication industry, all mobile operating companies were ordered to slash their rates so that communication is made reasonable in the country.
From left: Econet CEO Douglas Mboweni and Econet Financial Director Roy Chimanikire From left: Econet CEO Douglas Mboweni and Econet Financial Director Roy Chimanikire

Other players capitalized and offered lucrative promotions to attract the then dissatisfied subscribers. As such, cash flows started changingas promos have already distorted the pricing system in Zimbabwe.

In addition, the world of technology has been changing every other day. Over The Top Services (OTTs) has taken the communication industry by storm and this has fallen heavily on mobile network operator as people no longer spend much money on calling. Over-the-top services now dominates the space with subscribers dumping voice calling services and preferring Viber-calling, WhatsApp-calling and Skype.

Information and Communication Technology, Postal and Courier Services Minister Supa Mandiwanzira at one point recognised that the declining mobile network operators’ (MNOs) revenues would have significant repercussions on their tax contributions.

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