Telecoms grapple under the economic downturn

There are sector-specific challenges bedevilling the sector such as over-taxation, legacy debts and unavailability of foreign currency amongst others.

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HARARE – The telecoms market is not insulated against the weakening economic situation. The recent Q2 2021 report by the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) shows that the sector is grappling with severe economic distress.

The sector reported an increase in revenue for the second quarter but is faced with rising operating costs. Revenues grew by 19% to ZWL24.7 billion from ZWL20.8 billion in the first quarter of 2021 whilst total telecommunications operating costs grew by 12% to ZWL14 billion from ZWL12.5 billion in the previous quarter.

In a statement accompanying the Q2 report, POTRAZ Managing Director, Gift Machengete said the sector is faced with challenges in the economy such as inflation, unavailability of credit, reduced consumer spending amongst other challenges.

“Besides these general factors, there are sector-specific challenges bedeviling the sector such as over-taxation, legacy debts and unavailability of foreign currency amongst others,” Machengete said.

The Central Bank introduced the forex auction market in June 2020 in a bid to attend to foreign currency shortages, however, it has remained insufficient to fully satisfy importers’ needs.

Unlike other services that may have alternative local supply, the telecommunications industry relies heavily on imports mainly in the form of equipment and software licenses which need to be upgraded from time to time.

“The shift to the auction based foreign currency market system seemingly eased inflationary pressures but the allocated foreign currency has not been sufficient to meet all network maintenance, upgrade and investment requirements,” Machengete.

Demand for internet connectivity has scaled up amidst the COVID-19 pandemic where work-from-home arrangements, e-learning, e-commerce, e-banking and virtual conferences have become the new norm.

This means that the telecoms providers need to be adequately equipped to be able to provide reliable services.

According to the report, the total number of active internet and data subscriptions increased by 1.9% to reach 9.2 million in Q2 from 9 million recorded in the previous quarter. Internet penetration rate increased by 1.2% to reach 62.3% from 61.1% recorded in the previous quarter.

Mobile internet and data traffic increased by 7.2% to record 23.436 Terabytes in Q2 from 21.865 Terabytes recorded in the first quarter of 2021.

Government is targeting to increase the internet penetration rate from 59.1% recorded in 2020 to 75.42% by 2025 during the reign of its economic blueprint, National Development Strategy 1 (NDS1), while the mobile penetration rate is targeted to increase by 100%.

Improved Information Communication Technologies (ICTs), are regarded as the key drivers of economic development and the attainment of an upper-middle-income class by 2030 as the world economies are going digital.

Machengete called for concerted efforts in the consolidation of strategies that deliberately focus on ICT development, executing smart policies and effective processes that embolden investments in ICTs and digital skills, and embracing emerging technologies that are crucial to the digital economy.

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