Currency devaluation is preventing telecommunications operators in Malawi from embarking on network upgrade and expansion programs, according to analysts and industry executives.

At the end of March Telekom Networks Malawi bemoaned the country's high inflation and the weakness of the local currency, the Kwacha, against the US Dollar.

"A high inflation environment, high interest rates and the impact of volatile exchange rates on our significant foreign currency denominated expenditure continue to drive increased costs for the operation," said Telekom Networks Malawi chairman, Mathews Chikaonda.

A report, Malawi – telecoms, mobile and broadband – statistics and analyses compiled by analysts at Ken Research, has confirmed the impact of currency devaluation on telecommunications operators.

The report states that operators including Bharti Airtel, G-Mobile and Celcom Malawi have failed to launch services.

"Telcos (in Malawi) have been affected by the currency devaluation imposed in mid-2013, which has delayed their ability to fund network upgrades. In addition, the government in mid-2013 instituted a tax on internet services, the additional cost of services being passed on to consumers," according to analysts at the research firm.

Telekom Networks Malawi last week reported that service revenue for the year to end December had grown by 24% to $72.2 million or 447 million Malawi Kwacha at an exchange rate of approximately 1USD = 684.046 MWK.

The telco says "while current levels of profitability are acceptable, they need to be maintained to sustain future investment in infrastructure expansion projects and upgrade of technology".

However, according to the Ken Research report, Malawi is one of the world's least developed countries and its "mobile penetration remains very low" in comparison to the African average.

"This allows for considerable opportunities for further growth. To encourage additional market competition, the government has followed in the footsteps of several of its neighbours and introduced a converged licensing regime which allows the two fixed-line operators, Malawi Telecommunications (MTL) and Access Communications (ACL) to enter the mobile market as well," it says.

According to the report, Malawi has a mobile penetration rate of 38%, and an internet penetration rate of about 6.8%.