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Currency Weakness Chokes Telcos

The continued weakening of the Zimbabwean dollar against erratic tariff reviews poses a serious threat to the viability of mobile network operators, industry players have highlighted.

Mobile Network Operators (MNOs) last received a tariff review in October 2019 when their regulator, the Posts and Telecommunications Regulatory Authority of Zimbabwe (Potraz), awarded a 95,39 percent tariff increase.

At that time, Potraz said “the previous tariff schedule was no longer valid owing to continued cost escalations for operators”.

The cost of doing business in the country has however remained elevated as businesses grapple with fluctuations in exchange rates between the local dollar and the US dollar.

In October, the Zimbabwe dollar was trading at 15,7 to the US dollar. But the local currency has since dropped to 17,28, as of yesterday, on the interbank market.

The depreciating Zimbabwe dollar meant MNOs and telecoms operators (telcos) will have to fork out more to buy the US dollars that they need to pay for imported supplies and licence fees to keep their vital service platforms operational and to maintain a reasonable grade of service.

To keep up with new technologies, telcos need to invest in capital expenditure.

Failure to adequately do so has already seen a reversal in the viability of telecoms companies, as revenues fall due to suboptimal tariffs.

For an industry that relies heavily on imported and ever changing software and hardware components, the affordability and availability of foreign currency is crucial.

However, at current tariffs, MNOs will find it difficult to buy foreign currency to reinvest in their businesses.

Telecel recently highlighted the challenges which it said are choking business.

“Specifically, rapid depreciation of the local currency and the levels of tariff increases approved, which continue to lag behind inflation, has affected the ability to meet the (business’) foreign currency-denominated obligations, especially spares for equipment and service level agreements and support,” Telecel said in a recent statement.

Competitors, Econet and NetOne have also highlighted that current tariffs are now sub-economic.

In its latest trading update, Econet said: “Our tariff continues to lag behind inflation and given the rapid local currency depreciation since February 2019, the tariffs are now at sub-economic levels.”

Econet, together with other industry players, said it will continue to engage with Potraz in an effort to adopt a tariff regime that will ensure continued viability of the sector as well as quality of service.

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