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Conflicting Signals From Potraz, As Telco Industry Challenges Mount

The Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) has been in the news for very different, if not contradictory, reasons in the past week.

On Wednesday, the 20th of March 2019, Potraz released the fourth quarter sector performance report at an event held its head office in Harare. The report largely painted a picture of an industry battling raising costs and an unfamiliar decline in revenues.

Then two days later, from the same offices, Potraz sent out a circular to mobile operators, rejecting their tariff review proposals, despite the rising industry costs highlighted its own report, and in spite of the recent local currency devaluation and the fact that much of the operators’ costs have been going up – including fuel – or largely remain in scarce US dollars.

Potraz’s 2018 fourth quarter sector performance report, compiled and published by the ICT industry regulator itself, raised some unusual red flags for an industry that has driven economic growth for several years, as well as facilitated growth in other sectors of the economy because of the pivotal role of telephony, data and communication technologies in business.

The report showed that for the first time in over 10 years, the sector recorded a 13 percent decline in revenue (of about $44 million), between the 4th quarter and the 3rd quarter of 2018. In the same quarter, the report showed that operating costs went up by 5 percent.

But what should probably worry operators and concerned stakeholders most is the fact that year-on-year, between 2017 and 2018, operating costs went up by significant 25 percent.

The report did show operators’ revenue growth per user of 29.8 percent. But these were dwarfed by a much larger cost per user of 40.7 percent recorded by the operators.

The picture painted by the Potraz report was of an industry whose revenues are declining and whose operating costs are steadily rising.

It did not end there though; the report further showed that over the course of 2018, operators reduced their investment in network infrastructure by 41 percent, from about $100 million, to $59.5 million.

This means that despite everything else we may have been told, the report shows that mobile operators are struggling to reinvest in growing the infrastructural capacity of their businesses, with more money being channeled towards raising, day-to-day operational costs, and less and less money left to invest in infrastructure.

Besides the operators, the reduction in network investment has a direct impact on service delivery quality, and should worry both customers and the regulator. Part of Potraz’s mandate is to ensure consumers get good service delivery from operators.

However, in the same week that the regulator released the report, it also rejected any meaningful tariff review for the mobile operators.

Reports say discussions are underway between the operators and their regulator, to try and ‘find each other’ and reach a common position. But as the discussions happens, it would appear that for months, the storm clouds had already begun to gather and the tell-tale signs were already there.

About a month ago, industry leader Econet suffered an ominous network outage for all its major services, that lasted nearly a whole day, although its network in some parts of the country was not affected.

Soon after, the operator was forced to strenuously deny reports – which could have been exaggerated – that its network was facing imminent collapse due to lack of vendor support because of an unpaid foreign currency debt owed to a foreign telco equipment supplier.

While the operator vehemently denied that its network faced collapse, it was silent on the alleged foreign currency debt alleged in the reports.

Apart from Econet, the outstanding foreign obligations of fellow operators NetOne and Telecel – both of which are now State-owned – are well documented, along with that of State-owned fixed operator TelOne. Their ‘legacy debt’ is common knowledge, and something they have been pushing the government to ‘warehouse’ and help them pay.

Whatever becomes of their efforts, and whoever eventually pays the debt – the government, through the taxpayer, or the State operators themselves – the debt will still need to be paid, and paid in foreign currency.

It is therefore puzzling, if not mind-boggling, from an economic and business point of view, and from a sector viability perspective, to understand the thinking behind Potraz’s refusal to review mobile telecom tariffs and save the industry.

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