Econet says it was deprived of over $130 million in revenues through government & regulatory interference

Econet Wireless, Zimbabwe’s largest mobile operator has attached a value to the interference that it has encountered from the industry regulator POTRAZ and the government.

In a statement accompanying its consolidated annual financial results, Econet’s chairman Dr. J Meyers highlighted how the regulatory directive to reduce tariffs as well as the 5% tax added to all airtime prejudiced the operator of  $95 million and $30 million respectively.

Part of the statement reads,

We estimate that the adverse impact of the tariff reduction on the full year revenues was about US$ 95 million. Contrary to normal practice, where excise duties are levied on the customer, the excise duty on airtime, was levied on the Company. This position was, however, reversed on 1 January 2016, and the Company was allowed to levy the duty on its customers. The excise duty levied on the Company resulted in a revenue reduction of US$ 30 million, for the year under review.

POTRAZ’s reduction of interconnection fees from 5 cents to 4 cents per minute was also identified as a cause for reduced revenues, depriving Econet of $4.5 million while the increase in contributions to the Universal Services Fund (USF) from o.5% to 1.5% of revenue was also cited as additional $0.8 million in costs.

Econet has also calculated the costs associated with de-registering subscribers who aren’t compliant with KYC regulations, placing the value of lost revenue from these subscribers at $2 million and the cost of re-registering them at $500.000

All this comes to $132.8 million in deprived revenues.

Ever since POTRAZ, the Zimbabwean telecoms regulator issued a directive to mobile operators to reduce their voice tariffs there have been complaints from operators that this move would accelerate the decline of their revenues.

The loudest criticism of this move was from Econet Wireless and the operator went on filed a lawsuit against POTRAZ at the beginning of the year for $132 million citing the lost revenue and calling for clarity on the Universal Services Fund.

With the telecoms industry facing other challenges such as shifting usage trends and a tough economic environment, the directives issued by the regulator have been cited by all three mobile operators as  contributory factors in the reduction of revenues.

As much as these might be genuine concerns, the regulator,  and the government haven’t shown any signs that they will be making any concessions especilly since some of these changes like the 5% levy on airtime were meant to increase revenues for the state.