Potraz, mobile network operators on collision course over tariff hike

BRIDGET MANANAVIRE/ LISA TAZVIINGA

MOBILE network operators are on a collision course with the regulatory authority Postal and Telecommunications Authority of Zimbabwe (Potraz) after it emerged the sector’s players are pushing for a 150% tariff increase.

Potraz has, however, turned down the tariff hike, but instead proposed an incfrease of up to 37,5%. This would see charges marginally rising up to RTGS$0,22 from RTGS$0,16 per minute.

The 150% tariff review proposal by industry players would have translated to RTGS$0,40 per minute from RTGS$0,16.

The operators want the regulator to adjust tariffs using the USD market exchange rate based on current tariffs, without taking into account the changes in mobile traffic movements and cost of service provision. As at Thursday midday, the official rate stood at 1:3. Insiders involved with the negotiations between industry players and Potraz said
the regulator is opposed to the 150% tariff increase because “not all costs of service provision are incurred in foreign currency.”

The clash saw representatives of Telecommunications Operators Association of Zimbabwe (TOAZ), including Econet, TelOne, NetOne and Telecel and Potraz meeting with the Reserve Bank of Zimbabwe (RBZ) governor John Mangudya where it was agreed that the consumer needed to be cushioned from steep tariff increases.

Potraz has argued that the 37,5 % increase is justifiable, citing that anything higher would further erode the consumers’ income.

Zimbabwe Independent’s investigations revealed that Potraz used the cost based principle in setting tariff thresholds using the Long Run Incremental Costs (LRIC) models that were built in 2014 and updated in 2017.

In so doing, the regulator considered the cost of service provision, market situation in terms of traffic usage trends, the need to ensure service affordability and the general economic fundamentals in order to strike a balance between operator viability and service affordability.

According to the first regulatory circular of 2019 by Potraz, seen by the Independent, the charges of the current tariff were way above the calculated costs and left enough room to cushion mobile operators against most of the economic turbulence.

“The tariffs threshold set in 2018 were well above the 2017 LRIC update results. This has had a cushioning effect on operators against the current inflationary pressures. The need for operators’ viability against service affordability cannot be overemphasised. It is in this vein that tariff adjustments will be assessed to avert risk of shrinking demand for the various services which can compromise operators’ sustainability,” read the circular. Tariffs thresholds were last reviewed in 2017, lending the average cost of calls per minute across all networks at about 10 cents per minute inclusive of tax.

Potraz, however, turned a blind eye to network providers who were charging consumers 17 cents per minute which was higher than the expected charge, which consumers could afford.

The regulator is set to craft a Price Index specific to the sector to cater for the variations of the US dollar exchange rate.

Telecoms operators are are still pushing for higher tariff increases as they told the Independent that they were still in consultation with the regulator, as the tariff changes are subject to review.

“We are still making representation to them (Potraz). But you can also send me written questions,” Telecel CEO Angeline Vere said.

Econet has already notified its customers of the changes, with voice calls set at RTGS$0,21. The company, however, said they will be having further consultation with Potraz.

“We are still in consultation with the regulator,” a spokesperson of the mobile operator said.

NetOne spokesperson Eldrette Shereni said they had only received the circular with the tariff proposals yesterday afternoon and were still analysing how they were going to
proceed.

“We will be able to give a comment after we have come up with a position because right now we are working with the tariff department on that,” she said.

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