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#MondayBlues: Government Must Prioritize, Subsidize Telecoms sector.

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In the past few days, we have seen the government working tirelessly towards subsidizing wheat and grain, mainly because the two are basics that Zimbabweans can not afford to go without.


One wonders, especially after acknowledging that access to the internet and telecommunication services is now a human right, why this special sector never gets some form of cushioning from government.


Cushioning is expected to at least avoid a looming demise of the sector.
A Potraz second quarter sector performance report shows mobile networks reported a 25,7 percent growth in operating costs to record $233,7 million from $185,9 million the previous quarter.


This comes against a marginal decline in active internet subscriptions of 1,1 percent from 8.4 million to 8.3 million as consumers fail to buy data. Indications are that data consumption and voice traffic fell further after June.


These operational costs are still souring and sadly the last trading results which are yet to come are expected to be worse. Projections are that stats dropped after data prices went up by a huge margin, rendering more subscribers completely unable to top up.

I have never been a fan of subsidies of any kind for the very obvious reason that someone somewhere is paying for it.


This is among the reasons citizens end up being overtaxed. Some even end up feeling like they don’t need to carry their weight, particularly when it comes to unemployment benefits.


However, there are times you can’t avoid subsidies especially when you are in an economy such as Zimbabwe.


It has been described by some as a casino economy and now it could easily pass for something worse.


No economic text books seem to have the answers to our problems or it’s just an issue of competing interests between what ought to be done and the grave costs to the powers that be, ultimately.


Lest I digress, the purpose of this article is not to look at our economic woes, but rather specifically the telecoms industry and how it needs to be treated as a strategic industry that is very critical and sensitive. As such it requires decent forex allocation, cushioning and concessions that enable players to thrive under current circumstances.


Information gathered by TechnoMag shows that Zimbabwe’s telecoms sector is in a trouble and actually threatened with collapse amid fears players are operating at a loss.

Yes at a loss. Don’t be fooled by some of these big numbers in local dollars that amount to nothing when actual expenses in respect of capital projects that are very critical and come in US dollars must be paid.


Pricing complications due to an exchange rate crisis in which the Zimbabwe dollar continues to slip against the US is causing headaches for the sector which, unlike other industries, has no latitude to increase tariffs willy-nilly given its sensitive nature and critical role in the country.
The local dollar traded at 2,5 against the US dollar when the interbank market was launched February and now stands at over 16.


This leaves the country’s three major players in the telecoms industry-Econet Wireless, NetOne and Telecel- in a catch-22 situation whether or not to continue raising tariffs to a market that simply can’t afford it or to absorb loses until operations become unsustainable.


At current rates, the players cannot afford to invest in infrastructure. This is despite the fact that mobile technology is ever-changing. As the country boasts of installing new LTE base stations, technology is moving ahead with 5G, leaving a huge gap to catch up. All this requires capital.


Currently, the costs of running the business have ballooned because of diesel costs for generators at offices and base stations, but the tariffs, the major source of income, remain too low.


“At this rate, don’t be surprised when we start retrenching people, because we can’t cope. Retrenchments are likely to come sooner for this reason and we can even get to a point of shutting down,” an executive with a major telecoms company said.


“Right now our situation will be exactly like that of Zesa where you control tariffs until the service can no longer be provided. That’s where we are going,” he added.


A few weeks back, Econet and Telecel called on government to change the tariff regime from a telecommunications price index (TPI) based model to the inflation based consumer price index (CPI) to cushion the players from spiraling inflation.


The TPI system reviews prices once in about three months while CPI is reported on a monthly basis.


The ball is now in government’s court to ensure the industry remains afloat, providing services efficiently to citizens. Only last week, ICT minister Jenfan Muswere said availability and the ability to use ICTs and including the internet is a basic need.

Mobile networks play a huge part in access to the internet for ordinary Zimbabweans who depend on mobile internet.

It is high time government realizes and starts acting like they know it is not only fuel, medicine, maize and electricity that’s critical or fall under strategic items that require priority for Zimbabwe. Like it or not, telecoms is part of the group.


Meanwhile, the tax structure, including huge license fees, for telecoms is just too much.
The government takes $137.5million and when this was announced it was USD value, an amount which no company can still be expected to target in this environment.

This does not include the government USF fund tax, VAT, duty on ICT imports, mobile money charges etc.


If all these costs are mandatory and must be paid by the operator who has a diminishing cash box, it simply means we have allowed the same players to press the consumers.

I have never been a fan of subsidies of any kind for the very obvious reason that someone somewhere is paying for it.


This is among the reasons citizens end up being overtaxed. Some even end up feeling like they don’t need to carry their weight especially when it comes to unemployment benefits.

However, there are times you can’t avoid subsidies especially when you are in an economy such as ZimbabweIt has been described by some as a casino economy and now it could easily pass for something worse.


No economic text books seem to have the answers to our problems or it’s just an issue of competing interests between what ought to be done and the grave costs to the powers that be, ultimately.


Lest I digress, the purpose of this article is not to look at our economic woes, but rather specifically the telecoms industry and hoe it needs to be treated as a strategic industry that is very critical and sensitive. As such it requires decent forex allocation, cushions and concessions that enable players to thrive under our circumstances.


Information gathered by Technomag shows that Zimbabwe’s telecoms sector is in a rut and is actually threatened with collapse amid fears indications players are operating at a loss. Yes at a loss. Don’t be fooled by some of these big numbers in local dollars that amount to nothing when actual expenses in respect of capital projects that are very critical and come in US dollars must be paid.


Pricing complications due to an exchange rate crisis in which the Zimbabwe dollar continues to slip against the US is causing headaches for the sector which, unlike other industries, has no latitude to increase tariffs willy-nilly given its sensitive nature and critical role in the country.
The local dollar traded at 2,5 against the US dollar when the interbank market was launched February and now stands at over 16.


This leaves the country’s three major players in the telecoms industry-Econet Wireless, NetOne and Telecel- in a catch-22 situation whether or not to continue raising tariffs to a market that simply can’t afford it or to absorb loses until operations become unsustainable.


At current rates, the players cannot afford to invest in infrastructure. This is despite the fact that mobile technology is ever-changing. As the country boasts of installing new LTE base stations, technology is moving ahead with 5G, leaving a huge gap to catch up. All this requires capital.


Currently, the costs of running the business have ballooned because of diesel costs for generators at offices and base stations, but the tariffs, the major source of income, remain too low.


“At this rate, don’t be surprised when we start retrenching people, because we can’t cope. Retrenchments are likely to come sooner for this reason and we can even get to a point of shutting down,” an executive with a major telecoms company said.
“Right now our situation wil

l be exactly like that of Zesa where you control tariffs until the service can no longer be provided. That’s where we are going,” he added.


A Potraz second quarter sector performance report shows mobile networks reported a 25,7 percent growth in operating costs to record $233,7 million from $185,9 million the previous quarter.


This comes against a marginal decline in active internet subscriptions of 1,1 percent from 8.4 million to 8.3 million as consumers fail to buy data. Indications are that data consumption and voice traffic fell further after June.


A few weeks back, Econet and Telecel called on government to change the tariff regime from a telecommunications price index (TPI) based model to the inflation based consumer price index (CPI) to cushion the players from spiraling inflation.


The TPI system reviews prices once in about three months while CPI is reported on a monthly basis.
The ball is now in the government’s court to ensure the industry remains afloat, providing services efficiently to citizens. Only last week, ICT minister Jenfan Muswere said availability and the ability to use ICTs and including the internet is a basic need. Mobile networks play a huge part in access to the internet for ordinary Zimbabweans who depend on mobile internet.


It is high time government realizes and starts acting like they know it is not only fuel, medicine, maize and electricity that’s critical or fall under strategic items that require priority for Zimbabwe. Like it or not, telecoms is part of the group.

Nicole Madziwa

ICT Knowledge Now a Basic Need: Muswere

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