Tariff cuts caused more harm than good

While general Zimbabweans celebrated the landmark victory that saw mobile tariffs reduced from an all-time high of 23 cents to 15 cents, the effects have proved to be detrimental to companies and Government.

According to a Government report, revenue generated by the three mobile operators – Econet, Netone and Telecel in the second quarter of 2015 was $183,1 million , representing a 2,9 percent decline from $188,55 million recorded in the previous quarter.

Operators registered a 14,2 percent decline in quarterly revenues in the first quarter and the total value of mobile money transfers in the quarter declined by 7,7 percent.

Revenue from fixed telephone voice service declined by 14,6 percent to a record $30,5 million in the second quarter of 2015 from $35,6 million recorded in the previous quarter.

In the region, Zimbabwe was the most expensive, making access to communication a privilege not a right, hence the Government through the national regulator Potraz was right in seeing the adjustments of these tariff to make access to information and communication a right for all.

While this was obviously a good move by the Government, they probably approached the matter without carefully evaluating how the same move would not only affect the operators, but them as well as they heavily rely on taxes and commissions from telecommunications businesses.

This year, Econet Wireless Zimbabwe and Telecel Zimbabwe have sent many of their employees packing due to the difficult operational environment and low revenues.

Zimbabwe’s mobile sector is the second largest tax payer, which means it has been greatly contributing to the fiscus.

Mobile operators are required to pay a whopping $137,5 million licence fee to Potraz, probably one of the highest in the region. There are also a plethora of other taxes and charges including the Universal Service Funds, levy and other monthly commissions charged per profit margins.

Overally the Government separately introduced a 70 percent dip in returns caused by a 5 percent excise duty on airtime sales, 25 percent duty on handsets and ICT products and 5 cents levy per transaction on mobile money transfers, compounded by the 35 percent voice tariff reduction which only Econet fought against Potraz through the courts.

Econet Wireless Zimbabwe, it seems lost the case ven after appealing to the Supreme Court.

The effects should have been predictable as Econet led the list in laying off hundreds of workers, and for once the company that was a dreamland for many was seen struggling and left with no option but to offload employees.

These direct beneficiaries are critical in developing the sector meaning for that trading period, we may expect little or no creative thinking, branding or new products altogether as most of these companies are standalone entities who feed from the sector.

In developed countries, creative branding or promotion has heavily moved their economies as they keep their customers on the edge and excited to try new products or promotions.

A depression like the one we are seeing will directly affect these sectors which will indirectly affect those associated or affiliated to these companies including companies manufacturing banners materials, radio and TV slots, print adverts and online adverts.

These effects will directly affect even the ordinary man on the street who is selling airtime or the next potential customer who was supposed to be buying. A sharp drop in spending tendencies will be the new order of the day.

Slowly but surely, the sky will fall on Zimbabwe’s telecommunications sector if nothing is urgently done to salvage the sector.

Unfortunately there are no signs that things are going to be better in the near future. As 2015 comes to an end, 2016 is likely going to be worse for the telecommunications sector.

The average revenue per user (ARPU) in Zimbabwe has continued to drop due to general economic hardships. Today very few people are using $1 for airtime daily meaning from the 7 million or so active users, the average approximated consistent subscribers are topping less than $8 per month or only $2 per week.

The international standard of measuring revenue earned from a subscriber is called Average Revenue Per User (sometimes known as average revenue per unit), usually abbreviated to ARPU, and is defined as a measure of the revenue generated per user..

According to Potraz 4th quarter report of 2014, the highest Average Revenue per User (ARPU) per month was registered by Econet at $8,17 while Telecel’s (ARPU) remained flat at $4 in those 9 months and NetOne had the lowest ARPU at $3,35.

For the fixed operator, the total number of minutes processed recorded on fixed telephone network declined by 3 percent to 189 059 292 from the previous quarter according to the Potraz report.

In its Postal and Telecommunications Sector Performance Fourth Quarter report, Potraz said the total number of minutes processed on the fixed telephone network stood at 189 059 292 during the fourth quarter of 2014 representing a 3 percent decline from 194 989 961 minutes recorded in the third quarter of 2014.

The average revenue per user (ARPU) per month for the fixed network’s voice service in the fourth quarter of 2014 was $44,93.

This was however a 15,1 percent increase from the ARPU of $39,05 realised in the third quarter of 2014.

Mobile money transfer subscriptions went up by 7,3 percent from 4,9 million subscriptions and stood at 5,3 million at the end of 2014. The total value of transactions for mobile money services have increased in value to $445,7 million from $403 million recorded in the third quarter which translates to a 10,6 percent increase.

The continued decline in total mobile revenues can also be attributed to alternatives such as Whatsapp, Viber and Skype.

The national tariff cut, however, did not motivate subscribers to make more calls.

Operators will need to quickly accept that voice and SMS are no longer their main revenue earner and start pushing more of data-based traffic to gain from the numbers since they almost all have the enabling infrastructure.

Maybe Government can save the crisis by re-looking into the tariff or the players will need to be more innovative and create products that will woo more traffic and subscribers to their network should they survive till 2017.

  • ◆ The writer is the editor for TechnoMag, Zimbabwe’s Premiere Technology. Magazine, More In full videos from www.technomag.co.zw
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