DELAYS in approving tariffs against the backdrop of rising inflation and a weakening domestic currency almost brought the country’s multi-million-dollar telecommunications industry to its knees as overheads and pressure to meet international obligations outpaced the pricing regime, the country’s largest mobile phone operator says.
Official figures show that the year-on-year inflation rate for July 2022 increased to 256.9% from 191.6% in June 2022 gaining 65.3 percentage points.
The month-on-month inflation rate in July 2022 was 25.6%, shedding 5.1 percentage points on the June 2022 rate of 30.7%. After months of persistent increases in month-on-month inflation, in July 2022 the month-on-month inflation declined to 25.6%, shedding 5.1 percentage points on the June 2022 rate of 30.7%.
Despite rising inflation, Zimbabwe’s telcos regulator was not quick to adjust the tariffs to cushion hard-pressed consumers from the floundering.
According to Econet Wireless’ annual report for 2022, it took nearly a year for the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) to review the tariffs.
The telecommunications sector was granted a staggered tariff adjustment by the regulator of 61% in July 2022, and a further 61% with effect from 1 September 2022, and a further 61% with effect from 1 November 2022. The tariff adjustments will cover voice, SMS, data and internet services and are determined in the local currency.
“The last tariff review for the sector, during the reporting period, was carried out in September 2021 using the telecommunications pricing index (TPI),” James Myers Econet chairperson says.
“The inflation that was experienced since that time has not been factored into our pricing framework as at February 2022, meaning that our tariffs are now unviable for the business to continuously invest to meet the increasing demand for its services.
“Regional comparatives are based on average operator tariffs in the Sadc region. Local tariffs were converted to US$ from ZWL using an interbank rate of ZW$380 to the US dollar. The low tariffs of the industry are much lower than the region and this poses a threat to industry viability.
“The telecommunications industry has been struggling to meet the capacity and coverage demands of its consumers. On 6 July 2022, the regulator approved a headline tariff increase for the sector of 61%. The last approval of tariffs was granted in September 2021.”
Before the latest tariff adjustments, Econet observed, a call would cost US4.2 cents in Zimbabwe compared to an average of US8.8 cents charged in the region. Local operator charged US0.9 cents per short message service (sms) while the regional average stood at US2.7.
According to Potraz, Zimbabwe’s mobile network operators raked in less foreign currency during the first three months of the year after inbound calls into the country registered an 8.5% decline while outbound calls surged to tariffs.
“This may be attributable to uncompetitive tariffs, where it is now cheaper for residents to call outside the country, than for foreign residents to make calls into the country. This results in a decline in foreign currency earnings from international voice traffic after settlement, reads a Potraz report.