Low tariff costs dent Econet’s half-year performance
Low tariff costs has impacted Zimbabwe’s largest phone operator, Econet Wireless, which posted a ZW$5,78-billion loss in the first half of August 2022.
The company has continued to lobby the regulator to increase up tariffs amid rising inflation which has worsened in the period under review compared to the same period last year.
The telco recently raised its tariffs to ZW$41.77 per minute for voice calls, up from ZW$25.95, while data charges were raised to ZW$6,6 per megabyte (MB), up from ZW$4,1 per MB. Sending SMS’ now costs ZW$8,59 per message from ZW$5,33.
An excerpt from a statement released by the company last week reads: “Inflation adjusted revenue for the period under review was $112,4 bn, representing a decline of 1% compared to the same period last year. While voice and data volumes increased by 27% and 40%, respectively, these increases were negated by tariffs which remained unaligned to the cost base of the business.”
Local ICT expert Brighton Matonga says Econet’s subdued results were a result of the tariffs set by the regulator which are below the inflation rate and official exchange rate. “Investment in telecoms infrastructure has been slowing down because companies cannot access forex. Typically, telcos in the region spend 15% of their revenue on infrastructure. This continues to have a negative effect on the consumer experience.”
Chairman James Myers adds; “The subdued revenue performance is an indicator of frequent tariff reviews that are lagging behind inflation and changes in the consumer price index. For the period under review, year-on-year inflation was 285% and the tariff increase of 61% was not adequate to cover the loss in value. As of August, Econet had ZW$1,06 to every dollar of debt at the period under review.
Early this year, the country’s telcos increased tariffs again, by up to 20%, as they sought to adjust to pressure on revenue.
According to Matonga, the industry is heavily taxed with 15% of VAT applied to mobile airtime since 2009 and in 2015 a 5% excise duty was on airtime sales was imposed, as well as 25% tax on handsets and a 5% levy per transaction on mobile money transfers.
In November 2021, telcos called on the government to reduce the high tax burdens placed on them. Taxes at the time included a 5% heath levy, the 15% VAT, a 25% corporate tax, a 3% universal service fee, and 2% tax on the Intermediated Money transfer tax.