AfricaBusiness & FinanceZimbabwe

Zimbabwe’s Econet posts 15.6% decline in data traffic in Q1

By Almot Maqolo

Econet Wireless Zimbabwe, the country’s largest mobile operator, reported a 15.6% decline in data traffic during the first quarter, as consumer spending during lockdown fails to offset the overall slump in real revenues. In the same vein, voice and SMS traffic declined by 5.4% and 6.2% respectively on year-on-year basis. Voice and data services constitute over 80% of the company’s revenue base.

“Although, data traffic has been increasing since the start of the national lockdown due to more people working from home, making use of digital video conferencing channels, increased e-learning activity as well as the increased social media activity generated by the Covid-19 pandemic, the increase was not sufficient to offset the overall decline in the real revenues caused by the lockdown as well as the declining economic fundamentals,” the company said in its special trading update.

Econet said the regulatory tariff increases continue to lag behind inflation and have not yet factored the full impact of the exchange rate depreciation and hyperinflation. “The company together with the other players in the industry continues to engage with the regulator to implement tariffs that sustain the viability of the sector as well as ensure that a high quality of service standard is maintained,” it said.

In the period, the interbank exchange rate rose 38% from ZW$17 to ZW$25 against the US Dollar whilst the Old Mutual implied rate was up 124% from 45.6 to 102. Although the Old Mutual implied rate is not reflective of the pricing of goods in the market, it is an indicator of the distortions that exist in the market.

“These distortions have a bearing on the cost of goods and services, including our own. The local cost of providing our services is increasing in line with market trends, where the alternative market is used for reference pricing.”

POTRAZ adopted the Telecommunications Pricing Index (TPI) as the tool for setting tariffs while the firm’s costs have been increasing in line with the movements in the formal rate of exchange, albeit, with very little availability of foreign currency.

“The frequency and responsiveness to market changes have been low and slow, resulting in our real tariffs being severely undermined. This means that we are not able to pay our vendors for software licenses and certain upgrades required to increase our capacity and maintain the quality of service that our customers have come to expect from us,” Econet stated.

In the outlook, the mobile operator said it will continue to focus on cost containment and cash flow management to navigate the harsh operating environment.

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