Zim telcos petition Parliament over sustainable tariff formula

Herald Correspondent

Zimbabwe’s telecommunications companies, through their representative industry body TOAZ, have petitioned Parliament to legislate laws that allow the sector to charge economically sustainable tariffs.

Telecommunications Operators Association of Zimbabwe (TOAZ) chairman Lawrence Nkala petitioned Parliament to allow the industry to peg its prices in US dollars, to hedge against frequent exchange rate movements that have made pricing difficult, as the sector’s tariffs are determined in local currency.

The call comes at a time when the use of US dollars has become prevalent throughout the economy, with many businesses, traders and parastatals now indexing most of their goods and services in foreign currency to hedge against currency fluctuations and inflationary pressures on the local Zimdollar currency.

Statistics released by the Reserve Bank of Zimbabwe show that more than 60% of bank deposits are now US dollar-denominated, while Zimstat (the Zimbabwe National Statistics Agency) recently noted that over 70% of goods and services are now pegged in US dollars.

“We request that legislators urgently consider a review in the pricing model of the sector so that the prices are determined in US dollars and converted to ZWL using the prevailing interbank (auction) rate.

“This will introduce stability of pricing of our products and bring better transparency in our communication with our customers,” Nkala said recently.

The country’s telecommunications industry is currently faced with numerous challenges, including foreign currency shortages, foreign currency debt and relatively low tariffs in comparison to rising costs.

A major cost driver cited by the industry is loadshedding, which has resulted in significantly higher operating costs as companies are forced to purchase fuel for diesel generators to power base stations and keep the networks up.

The Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) last month increased tariffs by 50% to allow operators to recoup some of their costs and re-invest in infrastructure development, which directly impacts network coverage, access and service quality.

“The current tariff thresholds for telecommunication services were last adjusted in November 2022, using the Telecommunication Price Index movements for the period October 2021 – June 2022. Owing to dynamics in the economy in general, characterised by depreciation of the local currency, general price movements and usage patterns, it has become necessary to review charges for the telecommunication sector,” said the regulator in a circular to stakeholders.

Econet Wireless Zimbabwe, in a recent trading update, bemoaned foreign currency shortages, saying the shortage of foreign currency was hindering the mobile network operator’s investment in network upgrades.

“Although the business continued to witness an increase in demand for its services, foreign currency availability for servicing our foreign suppliers has continued to be a major challenge and has hampered our ability to implement much needed network maintenance expansion,” the update said.

“Overall, the local telecommunications industry has been struggling to meet the capacity and coverage demands of consumers as investment is long overdue. Capacity enhancements and routine maintenance has remained severely constrained by the lack of access to foreign currency to service our foreign network suppliers. Management continues to engage and negotiate payment terms with our network equipment vendors to secure their continued support,” Econet said.

“The pace of investment has remained below desired levels, thereby impacting service quality. The business has also had to continue using diesel engine generators in the face of sharp declines in available grid power.”

Nearly all of the country’s main telecommunication players, among them Econet Wireless, NetOne, Telecel and Telone, all carry significant debt, much of it owed to foreign equipment suppliers.

Their repayment plans have been hampered by the scarcity of foreign currency locally and the rapid devaluation of the local unit against major currencies.

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