Telcoms Sector Battles Steep Energy Costs

 

The viability of mobile network operators (MNO) and their ability to provide efficient services is under threat as they continue to grapple with high operating costs amid static tariffs that were last reviewed in October last year.

MNOs were last awarded a 95% tariff increase in October last year with Posts and Telecommunications Regulatory Authority of Zimbabwe (Potraz) director general Gift Machengete saying the “previous tariff schedule was no longer valid owing to continued cost escalations for operators”.

The cost of doing business in the sector has however remained, high with month-on-month inflation averaging 17% since October.

MNOs have had to deal with high operating costs, in particular those to do with powering their base stations.

Zimbabwe hiked the average electricity tariff by 320% in October last year, with energy regulator ZERA saying the power utility, ZESA, has to index its tariff to the US dollar to enable it “to recover from inflation and exchange rate changes”.

The availability of electricity has however been erratic, forcing MNOs to resort to the use of fuel to power base stations.

Since last year the price of diesel has gone up several times to the current price of ZS$19,55, further putting pressure on the costs of powering base stations and network operation centres.

Last year Econet Wireless Zimbabwe, which has the highest number of base stations in the country, pointed out that the escalating costs were not sustainable.

“Econet would like to point out that the company cannot sustain the current operating conditions of running back-up generators for 14 to 18 hours daily, based on the current heavily eroded tariffs.”

The MNO also said it was now incurring higher costs because of the heavy reliance on diesel generators, which it said needed to be serviced every fortnight as opposed to the scheduled quarterly service intervals before the power crisis.

Similar sentiments were echoed by competitors NetOne and Telecel.

In December 2019, NetOne CEO Lazarus Muchenje was quoted saying “costs are rising at a higher rate than our revenue generation capacity”.

“The recent power outages have resulted in hundreds of our base stations being powered by generators, which has increased our fuel consumption,” Mr Muchenje said.

Last week Telecel also blamed its challenges on inflation and the uneconomic tariffs which it said continued to lag behind inflation.

“The company’s main switching centres are in the industrial area and have been subjected to prolonged power outages which have resulted in the company’s technology operating costs ballooning due to the use of alternative power, particularly diesel, and has in turn affected base station availability in other parts of the country,” the company said.

The MNOs have said they will continue to engage the regulator Potraz in an effort to obtain an economic tariff that will ensure continued viability of the sector and the provision of good quality of service.

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