Operating costs growing faster than revenues across the telecoms and postal sector

The business-customer relationship oftentimes feels like a dysfunctional marriage. Both parties feel like the other party is taking them for granted. Nowhere is this more true than in our relationships with our Internet Service Providers and Internet Access Providers.

On the customer’s side, we feel we are paying too much for what we are getting.

• The price per GB in this country feels high,
• Reliability has been terrible for years now and seems to be getting worse,
• Electricity shortages mean our bundles expire mostly untouched

That’s the customer’s side of the story. Marriage counselling requires that we hear the side of the internet providers.

The Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) has released the Q4 2022 sector report and we get to see how these internet providers are doing. Spoiler alert: they have their own struggles.

Let’s look at the money.

Mobile operators

In Q4 2022 mobile operators (Econet, NetOne and Telecel) saw their revenues rise by 50.2% from Q3 values. From ZW$79.5 billion in Q3 to ZW$119.5 billion in Q4. That’s good, right?

If we use the black market exchange rates (from the relevant time periods) to convert those, meaningless to most, billions of ZW$ to USD we find that revenues grew from $97 million (79.5b/820) to $128.5 million (119.5b/930) in Q4 2022.

Well, the monthly inflation rate was 3.2%, 1.8% and 2.4% in the 3 Q4 months, against an optimal rate that should be around 0.17%. Year-on-year inflation in December 2022 was 243.8%, which is high.

As if that weren’t enough, their operating costs grew by a massive 63.8% in Q4. In any economy, Zimbabwe included, an increase in costs of 63.8% quarter-on-quarter is a cause for concern.

Costs rose to ZW$81.7 billion from ZW$48.6 billion. You will note that revenues grew by 50.2% whilst costs grew by 63.8%.

Converting those ZW$ to USD reveals costs grew from $59.3 million to $87.8 million.

You will remember that revenue less operating costs gives us operating income. That’s what’s left after expenses but before interest and taxes. The three mobile operators had a combined profit of approximately US$40.7 million in three months. Of which Econet no doubt commands the lion’s share.

This is not the first time that the operating cost growth rate has outpaced revenue growth.

• Declining data usage, spiraling operating costs – telecom operators not sitting pretty

It’s the same old problems that are responsible for this subpar performance;

• The usual staff, bandwidth and depreciation costs
• Electricity shortages leading to higher costs to provide service
• The high inflation we talked about coupled with high taxes erodes any revenue gains
• Forex shortages mean some equipment and services are sourced locally from suppliers that got their USD on the black market and so would have increased their prices accordingly

IAPs

The likes of Liquid, Telone and Dandemutande saw their revenues grow by 78.2% whilst their operating costs grew by 50.4%. We are talking about revenues of ZW$55 billion (US$59.1 million) in Q4 which were shared thus:

• Liquid – US$34.2 million
• TelOne – $16.5 million
• Dandemutande – $3.5 million
• Powertel – $3.3 million
• DFA – $0.7 million
• Telco – $0.5 million
• Africom – $0.4 million

Liquid continues to dominate. Their share of revenues actually grew from 53% in Q3 to 57.8% in Q4.

However since the turn of the year, Liquid has had its challenges, with service disruptions now happening with more frequency. TelOne is now offering some irresistible prices as they push their fibre and ADSL packages. It will be interesting to see if they will start chipping away at Liquid’s larger piece of the pie.

Zimpost

The postal and courier sector saw revenues rise by 20.7% whilst operating costs grew by 45.8% in Q4 2022. The sector recorded an operating income of ZW$400 million (US$430,000) for the whole quarter.

We see that all across the board, operating costs are spiralling. Revenues could not keep up with operating costs in Q4 2022. All sectors recorded operating incomes but we don’t know what the picture would look like after taxes and the like.

All we know is that some of the companies above are in the red. A few players dominate these fields and some of those that are struggling have the benefit of not having to publish their financial results. So we will never know their exact position.

So, dear customer of these companies, do you think you could cut them some slack or will you maintain that you are getting the raw deal? After all, we are still talking about millions of US dollars in profit for some of these companies. Let us know in the comments sections below.

Also read:

POTRAZ shares updates on infrastructure sharing. Econet, NetOne, Telecel sharing towers at over 267 sites

Does Econet’s 1130% profit increase even mean anything? Benefiting from relatively low tariffs?