SPEAKING at a recent annual telecommunications conference, ICT, Postal and Courier Services minister Tatenda Mavetera alluded that the government hoped to finalise the entrance of Starlink into the Zimbabwean market by the end of July. As the nation eagerly awaits the regulated entrance of Starlink, SpaceX’s ambitious satellite-based internet service, the industry braces for a seismic shift. Zimbabwe’s telecommunication market is dominated by established players like Econet Wireless, NetOne, and Telecel Zimbabwe.
These mobile network operators (MNOs) have invested in network upgrades, expanding LTE coverage primarily in urban areas. While Starlink introduces a disruptive alternative to internet provision, it is imperative to understand that it will not directly compete with MNOs. Starlink primarily serves fixed locations (homes, businesses), while MNOs cater to mobile users. Therefore, Starlink will only have to complement existing services.
Meanwhile, in a recent analysis on Zimbabwe's economy, the World Bank identified telecommunications connectivity as one of the main barriers to private sector growth.
The World Bank noted the constraint of high regulation of foreign ownership, which prevents attraction of private investment, and, therefore, recommended an adjustment of requirements on the minimum stake of local investors to support the liberalisation of the sector and enable the entry of specialised infrastructure operators, which in this case includes Starlink. Starlink’s constellation of Low Earth Orbit (LEO) satellites promises to revolutionise connectivity, and address the highlighted challenges by World Bank on private sector growth.
The LEO satellites can ensure reliable internet access to mining communities, non-governmental organisations and rural healthcare facilities, while telemedicine, education, and efficient communication become feasible. This is because satellites in LEO, which require the lowest amount of energy for placement, are more accessible and provide high bandwidth and low communication latency. While MNOs do not face a direct threat to their going concern on the mobile network front, the home or business wireless network business will be placed under immense competition from Starlink.
In the countries that have already licenced the internet provider, Starlink has proven to operate on a standard pricing rate, which marginally varies according to per capita basis in the respective countries. In Zimbabwe, Starlink will likely keep a standard pricing policy as that implemented in Zambia, and slightly lower than South Africa due to varying disposable incomes.
However, while the pricing may be standardised, the profit margins realised by Starlink will likely be impacted by regulatory fees in the respective countries. A study of Starlink operations in various countries has also shown a relatively stable profit margin, which emanates from tariff negotiation with regulators in the countries.
In a bid to strike relative profit margins in Zimbabwe, Starlink will have to negotiate a reduction in tariffs with Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz). Among the recommendations list by the World Bank to facilitate growth of the industry, Potraz was recommended to introduce a flexible approach to pricing by allowing telecom operators to pass on inflation within a predefined range, and to adhere to global tariff standard rates.
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Therefore, if Starlink manages to negotiate a tariff reduction in a bid to attain target margins, other operators in Zimbabwe will equally challenge the regulator for a tariff reduction across the sector. This will improve competitiveness within the industry, which allows for expansion as profitability increases.
Alternatively, Starlink will have to ditch its standard pricing model if Potraz is to refuse a bargain on tariff change. This way, Starlink will charge exorbitantly for acquisition, installation and subscription of its services, which will pave room for a thriving black-market of the service as is currently ensuing.
The licencing of Starlink in Zimbabwe is highly defining as it comes with significant shifts in the sector, which may improve or destroy the industry. Either the regulator will announce a tariff reduction across the industry, which will improve competence in internet service provision in Zimbabwe; or the black-market sale of Starlink services will thrive, which will ‘competitively’ destroy the presently licenced operators.
- Duma is a financial analyst and accountant at Equity Axis, a leading media and financial research firm in Zimbabwe. — [email protected] or [email protected], Twitter: TWDuma_
