Telecoms companies reel under acute forex shortages

PERSISTENT foreign currency challenges affected network deployment and maintenance in the first quarter of the year with the telecommunications industry reporting mixed performance.

Melody Chikono

Zimbabwe has been struggling with foreign currency shortages in the past decade, compromising economic growth as industry experienced difficulties in securing foreign credit lines as well as settling offshore debts.

The depreciating Zimbabwean dollar has also dealt a severe blow, making access to foreign currency more expensive.

Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) director-general Gift Machengete, in a first-quarter telecommunications sector report, said deployment and maintenance of the telecoms network was hampered as spare parts, equipment and vendor support fees required foreign currency.

“Furthermore, the credit crunch also negatively affected network expansion. The high cost of International Internet connectivity remains a challenge as Zimbabwe is a landlocked country, accessing bandwidth from undersea cables via Mozambique and South Africa,” he said.

The performance of the sector continues to be dependent on the economic environment which impacts the sector through service demand and consumption levels, operating costs and investment. Given the current inflationary pressures in the economy, operating cost containment will be critical if operators are to achieve profitability, as the increase in operating costs poses a threat to operator viability.

During the period under review, the sector recorded mixed performance with reasonable growth in some areas, but with notable declines in fixed voice subscriptions, data and internet subscriptions as well as voice traffic. The number of active mobile subscriptions increased by 4% to 13 724 522 from 13 195 902 recorded in the fourth quarter of 2019. The mobile penetration rate increased by 3,6% to reach 94,2% from 90,6%.

On the other hand, the number of active fixed telephone lines declined by 1,8% to 260 959 from 265 734 recorded in the fourth quarter of 2019 while the fixed teledensity remained 1,8%.

Machengete said fixed telephone subscriptions have been fluctuating over the years owing to the increased adoption of Voice over Internet Protocol (VoIP) and mobile telephony by corporates and households alike.

The sector witnessed a 2,5% decline in data and internet subscriptions to 8 614 401 from 8 836 299 recorded in the previous quarter, resulting in the internet penetration rate declining by 0,7% to reach 59,1% from 60,6% recorded in the previous quarter. The overall decline in data and internet subscriptions was attributed to the 2,6% decline in active mobile internet and data subscriptions.

The period was characterised by growth in revenue generated by the mobile telephone networks which grew by 26,2% to record ZW$2,1 billion in the first quarter of 2020 from ZW$1,65 billion recorded in the fourth quarter of 2019.

The use of Over-the-Top services, such as WhatsApp, Skype and Viber is expected to grow in the current economic environment as consumers cut back on communication expenditure.

“The principal cause of the decline in letter volumes has been the substitution of paper communication by electronic methods (e-substitution),” Machengete said.