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Zimbabwe telcos under renewed pressure

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REVENUES for Zimbabwe’s leading telecommunication companies are expected to remain under pressure for the foreseeable future due to rising costs, foreign currency shortages, lack of tax incentives in the sector and the effects of COVID-19.

Econet Wireless, Zimbabwe’s largest mobile network service provider, last week recorded a 6.5 percent decline in revenues to ZW$10.1 billion in the half-year to August 2020.

Electricity shortages are eating into local telco’s revenues as the companies are being forced to fork out millions of dollars to purchase fuel for use on generators to keep subscribers connected. In addition, foreign currency shortages, coupled with low tariffs, have affected the companies’ ability to reinvest in vital infrastructure.

Statistics from the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) show that capital expenditure by the mobile operators declined by 17.2% to record ZW$74 million in the second quarter of 2020, down from ZW$89,5 million in the first quarter.

“The telecommunications sector is also capital intensive and heavily reliant on debt financing, (therefore) the fluctuations in the exchange rate have resulted in huge exchange losses on debts to be serviced,” the regulator added.

James Myers, the Econet Wireless board chairperson, said his company was leveraging positive and strong relations with key partners who have allowed the mobile network operator to stagger its payments of foreign debt.

“Continuing to meet our obligations to our key partners is a priority as we develop and upgrade our infrastructure,” he said in the company’s half year results.

Market experts said it was crucial for the regulator to establish cost-reflective tariffs as well as tax breaks to allow industry players to recuperate.

Although Potraz introduced a sector specific pricing index, the Telecommunications Pricing Index (TPI), intended to bring a measure of viability to the sector, there are no incentives in the 2021 National Budget to spur the struggling industry, that offers essential services to both consumers and businesses.

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