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Foreign currency crisis hits telecoms operations

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The Postal and Telecommunication Regulatory Authority of Zimbabwe (POTRAZ) has said lack of foreign currency and credit crunch by telecommunication companies have affected the network expansion in the country during the first quarter of this year.

According to the first quarter of 2021 sector performance report, POTRAZ said operators and internet access providers (IAPs) have found it difficult to borrow during the period.

The sector report came after the central bank increased the bank policy rate to 40 percent and 30 percentfor long-term and short term borrowing, respectively.

Previously, the rates were pegged at 35 percent and 25 percent respectively.

A rate increase normally attracts banks to lend to productive sectors.

But Zimbabwe’s financial system has generally adopted a cautious lending strategy to avoid default risks heightened by volatilities, including hyperinflation.

“The inflationary environment, as evidenced by the rising cost of service provision has not spared operators in the sector,” POTRAZ said.

“The credit crunch, as well as foreign currency challenges, have negatively affected network expansion and maintenance as spare parts, equipment and vendor support fees require foreign currency.

“The high cost of international internet connectivity remains a challenge as Zimbabwe is a landlocked country, accessing bandwidth from undersea cables via Mozambique and South Africa,” the report added.

It said necessity for greater investment in digital technologies, skills and innovation could never be over-emphasised, noting that this was one of the key targets under the National Development Strategy 1.

During the quarter under review, total mobile operator revenues grew by 12,3 percent to record $13,8 billion, from $12,3 billion recorded during the fourth quarter of 2020.

However, the same quarter saw an increase in operating costs, which grew to $7,6 billion, from $5,7 billion recorded during the fourth quarter of 2020.

The rise in operating costs affected profits and limited funding for capital projects.

Revenue generated by the fixed telephone operator, TelOne grew to $1,57 billion from $1,4 billion during the quarter ended December 31, 2020.

Comparably, the fixed network operating costs increased by 76,1 percent to record $1,37 billion, from $775,2 million recorded in the fourth quarter of 2020.

“IAP (internet access provider) revenues grew by 48,9 percent to record $6,8 billion, from $4,6 billion. Meanwhile, total operating costs for IAPs grew by 26,6 percent to record $3,2 billion from $2,5 billion,” POTRAZ

said.

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