Very few businesses that are legally and formally operating are happy with the status quo prevailing in the economy. Hence it is no surprise that the ICT sector is not smiling its way to the bank as the Q3 2023 sector report shows.
While no one can dispute the above, the Shona say ‘jema newadya’ which describes the act of pretending to be in dire straits just so you fit in. I believe some of these ICT sector players are doing just that.
Here’s an overview of what happened in Q3 2023 as per the ICT sector report by the Postal and Telecommunications Regulatory Authority of Zimbabwe.
Increases in mobile (6%), internet/data (7.5%), and fixed telephone (3%) subscriptions were observed, indicating continued sector expansion.
This leaves the country with a flattering internet penetration of 70.1%, i.e. the percentage of the population that has access to the internet. Do note that the global rate is 65.7%.
The mobile penetration rate is even more impressive at 97.5%. That means there is almost a phone for every citizen. Of course, this doesn’t touch on the quality of the mobile phones, as anecdotal evidence shows that there is still a significant number of feature phones (mbudzi) in the market.
Also to remember is that some individuals have multiple subscriptions and phones and so skew the stats. I have three mobile subscriptions for example as do many people in urban areas.
Surge in Internet Usage:
Internet and data usage witnessed a 6.2% rise, which Potraz attributes to factors like business digitisation, e-learning adoption, and Over-The-Top media (WhatsApp, Facebook etc.)
On some level this actually shows that Zimbos are not really increasing their usage. The number of people connected to the internet increased by 7.5% and yet total usage only increased by 6.2%.
I believe the reason can be summarised in the hashtag you’re all too familiar with #DataMustFall. Even if Zimbos earned European salaries, the internet would be expensive here. Putting a cap on how much data we use.
Shifting Communication Patterns:
Fixed voice traffic declined while mobile voice traffic surged, due to the substitution effect of the likes of WhatsApp and other OTT applications. To think having a landline used to be a status symbol, now no one needs or cares
Positive Postal and Courier Performance:
Postal and courier volumes have been growing for quarters now, a bit surprising if we’re being honest. Could this be the sign that e-commerce is starting to pick up?
Could be and if delivering packages is the reason for this growth then e-commerce is really booming because many e-commerce players have their own logistics solutions that are not captured in the official stats.
Revenue Growth and Rising Costs:
Across all market segments, both revenues and operating costs increased, as has been the case in the last few years. Because the increases are mostly due to inflation, the important consideration is just how fast revenues are growing compared to costs.
Just a few quarters ago the headline was:
IAPs and Postal and Courier
This wasn’t the case in Q3 2023, at least for two of three segments of the sector. Internet Access Providers (IAPs) – Liquid, TelOne, Powertel, Dandemutande and Telco saw their revenues increase by 138.1% whilst their operating costs only grew by 14.4%.
The revenues bit is easily explained, it’s down to inflation and a depreciating currency. Or is it? See, we find that Q3 2023 provided some respite inflation-wise with July and September prices only rising 1% whilst prices generally fell by 1.3% in August.
This partially explains the 14.4% increase in operating costs methinks. It was only 14.4% because one month in the quarter actually saw prices fall. Still though, it’s still impressive that their operating costs only rose by that much in a full quarter.
By the same measure, this would mean IAPs enjoyed stable prices from their suppliers but they did not return the favour to their own customers.
Postal and Courier players saw their revenues rise by 53.3% and operating costs by 50%.
Lower month-on-month inflation didn’t help mobile network operators as much. Their revenues grew by 95.3% whilst their operating costs grew by 99.3%.
There are some unique operating costs that affect MNOs disproportionately, for example, the power cuts that necessitate diesel power at thousands of base stations across the country.
This scenario of operating costs surpassing revenue has been a persistent issue for MNOs in recent years, slowly eroding their profits.
So, while we complain about Econet, NetOne and Telecel robbing us blind with their high prices, they are complaining too.
The only problem is that the only solution they can see is increasing prices. That can’t be the only solution, especially when comparisons in the region always show Zimbabwean prices on the high side.
We saw that internet usage is not increasing as it should. How can it, when price hikes are a regular occurrence? Increased internet usage should represent a growth channel for MNOs but that’s not going to happen at the pace they want with this kind of pricing structure.
Summary of challenges
These are the challenges being faced by the whole sector:
- Inflationary Pressures: Revenue growth for operators was primarily driven by inflationary pressures and currency depreciation, not necessarily real-terms improvement in demand.
- Costly Operations: Bandwidth costs, depreciation, administration, and staff expenses remain key contributors to operating costs.
- Foreign Currency Constraints: Inadequate access to foreign currency hinders network expansion and upgrades, limiting potential investment and service advancements.
- Affordability Concerns: Low disposable incomes continue to be a major barrier to service uptake by a significant portion of the population.
- Infrastructure Challenges: Power outages pose operational difficulties and contribute to increased service provision costs, impacting sector viability and growth.
Potraz believes the following is the Outlook:
- Digital Transformation Drive: The increasing need for business digitalisation is expected to fuel further sector growth and service demand. However, even businesses are struggling to pay what the sector is charging.
- Tariff Revisions and Investment: Recent tariff reviews aim to improve operators’ Revenue-to-Cost ratios, potentially leading to increased investment and enhanced service delivery. This is the last thing we want to hear, our tariffs are already too high even though inflation is chipping at them. We all knew tariff increases were on the cards and so we can only sigh.
- Macroeconomic Stability: Ongoing efforts to stabilize the macroeconomic environment may facilitate greater investment in the sector, paving the way for improved infrastructure and service quality. I’m not holding my breath for the government to fix the economy, is all I’ll say on this.
- Local Content Development: Promoting local content creation for the internet could enhance content diversity and encourage domestic service utilization.