Operational constraints threaten to choke Zimbabwe’s TelOne
Zimbabwe fixed phone and broadband operator, TelOne, is bulking under viability challenges worsened by a controlled tariff mechanism within a hyper-inflationary operating environment.
Local telecommunication companies struggle with foreign currency shortages and battle to settle licence fees, for example, and this exacerbates the issue of poor service delivery.
Following its AGM in Harare, TelOne released a statement which reads in part: “The Company is faced with acute viability challenges due to the prevailing hyper-inflation against a tightly controlled tariff. The cost of importation and distribution of 1 Mbps is US$28, however, TelOne is unsustainably distributing the same unit at US$10 as the Company has been unable to get a tariff review yesterday.”
The last tariff review for TelOne was in September last year. The company said when measured against exchange rate movements, the effective tariff for voice products at US$0.07c per minute has deteriorated by 19.3% to US$0.058c by the end of December.
TelOne added, “No tariff adjustments had been approved for 2022. Consequently, the effective price for voice and broadband has fallen to an unsustainable US$0.025 cents per minute and US$0.00050 cents per megabyte, respectively, as of 31 May 2022.”
Zimbabwe’s highly uncertain exchange rate regime has added to the company’s woes.
Businesses have to use the official exchange rate which lags the popular but unofficial street rate by about 100%. Suppliers fix their prices using the street rate to recoup their costs but operators, who have to get approvals for tariff reviews, do not have that flexibility.
TelOne has had to implement cost containment measures during the year, especially on investments in the deployment of low cost structure LTE network to replace the copper network. This is against the backdrop of costs ballooning by 107% for the 2021 year, attributed mainly to “the general price increases in the market, the movements in the cost of fuel” and power.
TelOne, in which the government has a controlling interest, is also bleeding money due to theft and vandalism of network equipment. The company recorded approximately US$1,5-million in lost revenue and network elements for the year to the end of 31 December 2021.
“These losses stemmed from 333 network vandalism incidents being recorded during the year translating to a 27% increase compared to prior year. The biggest loss to the Company from acts of vandalism has been the business lost due to voice and internet service disruptions,” it said.