ZIMBABWE’s mobile voice tariffs are among the most expensive in Sub-Saharan Africa, raising the spectre of defencelessness of our local Mobile Network Operators (MNOs) to disruptors, famed for playing a sustainable low-balling pricing game anchored on robust lean cost structures.
The Human Capital Telescope with Brett Chulu
This comes against the backdrop of a rejection by the Postal Telecommunications Regulatory Authority of Zimbabwe (Potraz) to heed calls to revise downwards Zimbabwe’s mobile telephone tariffs in April last year, arguing that our tariffs were comparable to Sub-Saharan Africa’s.
This assertion, placed against current tariff statistics is now a half-truth.
It’s quite a poser how giant Kenyan MNO, Safaricom is managing to post impressive profits with a prepaid mobile voice tariff of 4 US cents a minute.
In fact, Kenya and Angola, according to information from Mobile Africa Tariff Tracker (Matt) for 2013, Kenya and Angola are jointly offering the lowest prepaid mobile voice tariffs in Sub-Saharan Africa (see graphic).
With an exchange rate of US$1 to 85 K sh and with Safaricom charging a mobile voice prepaid tariff of 4 K sh per minute, Matt’s tariff for Kenya is accurate. On the basis of these charges, Zimbabwe is charging 4,75 times more than Kenya and Angola. This naturally raises the question of whether Zimbabwe’s prepaid mobile tariffs are over the top.
Is this arguably too-big-to-ignore pricing gap a reflection of genuine structural economic differences between Zimbabwe and its low-tariff Sub-Saharan African counterparts?
Telecoms cost-drivers excuse
The answer to this question has serious implications for the future of Zimbabwe’s mobile phone industry.
Attributing the relative overpricing of voice charges to supposedly macroeconomic inefficiencies does not exorcise the ghost of future massive voice tariff slashes occasioned by cheeky disruptors.
In the event of a resurgent Zimbabwean economy, possibly after the much-anticipated general elections, in which much of the structural economic inefficiencies are likely to ebb away, can our local MNOs adjust their business models to adapt to a low tariff regime?
To justify the current relatively high tariffs obtaining in Zimbabwe, cost drivers resulting from unreliable power supply and poor rural infrastructure are cited, the argument being that local MNOs, in their bid to widen mobile coverage, have to install and maintain expensive generators and in some cases construct access roads to base stations.
Another widely-cited cost-driver is the inordinately high cost of capital, occasioned mainly by scarce liquidity and low country credit rating. Potraz, in recognition of this economic challenge has mooted taking into consideration the weighted average cost of capital (WACC) in determining tariff structures.
Admittedly, these are all valid arguments — in all fairness, in a normal economy, it is the role of government to provide basic economic enablers such as power and other key infrastructural requirements.
But are our telecoms providers telling the entire story?
The question of infrastructure-sharing has been raised in some telecoms quarters as a means of rationalising the industry’s structural costs.
Experts in telecoms I have spoken to have indicated that the current go-it-alone stratagem of installing fibre links neither makes economic nor technical sense in that a single fibre line is able to handle all our data transmission needs.
Put another way, we do not need each telecoms player to be laying their own fibre links, as that births unnecessary overcapacity. It’s akin to having each bus operator building their own road! Sharing of transmission infrastructure such as base stations has been suggested, and movement on that front is not yet visible, though it is understood telecoms policymakers are mulling legislation that compels infrastructure-sharing.
One would think that economic rationality should trump individualism —– the consumer has to bear the cost of duplicated investments. It could be counter-argued that it is the government that should be providing this infrastructure.
Tracing this line of reasoning, telecoms players are to be commended for taking the initiative to modernise telecoms infrastructure. On that basis, someone could argue that obtaining tariffs more than reflect the costs of doing telecoms business in this country. This is the sort of self-congratulatory thinking that makes disruptors thrive.
Whatever arguments can be proffered in justifying the current telecoms tariff regime, what cannot be denied is that the Kenyan pricing case is a conundrum that cannot be wished away. Despite operating in a low-tariff regime, Safaricom is posting impressive business numbers.
In the just-ended financial year, Safaricom experienced a 12,6% jump in voice revenues despite a compressed 1,8% growth in customers, that revenue-growth being achieved in a low-tariff regime.
This bespeaks a robust and resilient business model.
Discounting Zimbabwe’s infrastructural inefficiencies our MNOs are forced to wiggle round through private mitigation strategies, the 23 US cents per minute and 4 US cents per minute tariff difference strongly suggests there could be some huge internal cost inefficiencies our local MNOs dare not openly concede.
If an evidently efficient MNO such as Safaricom decided to invest in Zimbabwe, exporting their low-cost model here, would that raise the blood pressure of our local MNOs? Would they seek the sympathy of the Competition and Tariff Commission?
The tariff gap existing between Zimbabwe and Kenya points to the inherent vulnerability of our local MNOs to low-cost disruptors.
Disruptors have the uncanny knack for finding significant cost layers to strip away by rebelling against an industry’s accepted and unquestioned practices. It’s only a matter of time before a rebel-in-chief of telecoms emerges to successfully challenge Zimbabwe’s telecoms industry accepted practices.
Neither the Competition and Tariff Commission nor Potraz will be able to shield our local MNOs from serious disruptors.
Reflect on it
An innovation culture alone will soon be no longer enough in the telecoms industry. A culture of deep efficiencies should become the foundation for innovation efforts.
Chulu is a strategic HR consultant who is pioneering innovative strategic HR practices in both listed and unlisted companies. — firstname.lastname@example.org.