Zimbabwe: Telecom Tariffs Likely to Go Up Following Zesa Tariff Increases

23 November 2020

Telecommunication companies are likely to increase their tariffs soon to meet rising operating costs following the recent price increases by the national power utility Zesa, industry sources have said.

Zimbabwe's mobile network operators - Econet, NetOne and Telecel - last reviewed their tariffs in September, but electricity prices have more than doubled in the last two months, thus pushing up a key cost for the telecom operators.

The Zimbabwe Electricity Supply Authority (ZESA) Holdings, also warned earlier this week that the country could experience more load shedding due to multiple technical faults and reduced power generation, a situation that will force businesses to resort to expensive diesel generators to power their operations.

"Telecom service providers are currently experiencing a rapid rise in operating expenditure as a result of the inflationary operating environment. As an industry we are also struggling to cope with foreign currency shortages, which are affecting network deployment, procurement of network accessories and payment of vendor licence fees," said an industry insider.

"And now an increase the price of electricity, coupled with increased power outages will not only disrupt service delivery, but also directly negatively impact on our revenues."

Another executive with a State-owned telecoms company said telecommunications players were mulling seeking a viable and cost-reflective tariff from the authorities that will offset rising costs caused by electricity prices.

Confederation of Zimbabwe Industries president Henry Ruzvidzo recently said the 100 percent adjustment in electricity prices was going to trigger a hike in production costs. Several municipalities across the country have already increased water, sewage and refuse collection fees by more than 300 percent to meet the rising costs.

"There will be some movement in the inflation basket. Our energy supply mix still has a heavy reliance on imported power, although generation at Kariba is improving and will assist to reduce pressure on costs," Mr Ruzvidzo said.

Statistics from the Postal and Telecommunication Regulatory Authority of Zimbabwe (Potraz) reveal that fluctuations in the foreign currency exchange rate are affecting the industry's operations.

"The telecommunications sector is also capital intensive and heavily reliant on debt financing. The fluctuations in the exchange rate have resulted in huge exchange losses on debts to be serviced," the industry regulator said in its latest sector performance report.

Potraz also noted that capital expenditure by the mobile operators only declined by 17.2% to record ZW$74,059,483 in the second quarter of 2020 from ZW$89,455,678 recorded in the first quarter of 2020, reflecting operators' constraints to reinvest in the face of forex shortages.

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