Telecel now getting only 64 cents from each customer per month

The Postal and Regulatory Authority of Zimbabwe recently released the sector report for Q1 2022. There isn’t much in there that will surprise anyone. The trends we have been seeing in the last few years have more or less continued.

The depressing one is the Telecel saga. We have watched the once formidable mobile network operator flounder over the years. In Q2 2022 it was ngoma ndiyo ndiyo (the same drum).  

Telecel – the figures

In Q1 we saw Telecel command 0.9% of voice traffic, 1.4% of SMS traffic, and 1.2% of data traffic. All this despite having 3.5% of all subscribers. 

It got worse in Q2 if you can believe it. In Q2 2022, Telecel had: 

• 0.8% of voice traffic, down from 0.9% in Q1. In the same quarter last year, they had 1.3%
• 3.3% of SMS traffic, up from 1.4% in Q1
• 0.5% of internet and data traffic, down from 1.2% in Q1. This was 1.8% in the same quarter last year

There was a marked increase in SMS traffic. That’s the one positive we can draw from this. Unfortunately, SMS revenues still contribute much less to total revenues than voice and data. 

Mobile revenue contribution per service for the whole sector looked like this:

• Voice – 44.6%
• Internet and Data – 38.9%
• SMS – 6.6%

In monetary terms, this is what the above traffic translates to:

The total sector revenues were ZW$38.9 billion, of which voice was ZW$17.35bn, Internet and Data were – ZW$15.13bn and SMS was ZW$2.58.

Those three; voice, data and SMS are responsible for 90% of all revenue.

Telecel’s portion looks like this:

• Voice revenue – ZW$138.8 million. Which was around US$379K using the auction rate at the end of Q2. 
• Data revenue – ZW$75.7 million. Around US$207K.
• SMS revenue – ZW$82.5 million. Around US$225K.

Do note that we assumed that share of traffic is directly proportional to revenue earned. This may not be the case but we shouldn’t be too far off.

Telecel in serious trouble

Remember the above are quarterly revenues. So, in three months Telecel pulled in around US$811K from the 3 largest revenue earners. We can extrapolate the remaining 10% and still we will be looking at Telecel generating around US$900,000 in 3 months. 

Back when Q1 results came out we marveled that Telecel revenues had fallen from US$14m in 2015 to $700K a month. Somehow, we hit a new low in Q2 2022. Monthly revenues are now only around US$300,000. 

That means Telecel has seen a 98% drop in revenues since 2015.

Telecel has been losing subscribers for years and was down to 469,003 in Q2. That’s a measly 3.3% of all mobile subscribers. The MNO continues to struggle to extract revenue from those subscribers too. 

Average revenue per user has now fallen to less than a dollar a month. Telecel is getting only around 64 cents from each subscriber per month. This is down from the $1.30 we saw in Q1, a 50% drop quarter on quarter.

That means the average Telecel subscriber does not even buy a monthly WhatsApp bundle. 

At this point, Telecel needs some kind of miracle to turn this around. We are finding that their situation is getting worse with each quarterly report we get.

The rest of the picture

We expect that in just a few more years, revenue from data services will dwarf voice revenue, let alone SMS. 

In Q2 2022, data revenue contributed 38.9% to total revenue. Only 5.7 percentage points lower than voice. Yet Telecel’s data traffic saw a massive 53.9% decrease. 

This raises serious questions about Telecel’s future. In contrast, Econet’s data traffic increased by 20.5% and NetOne’s by 6.5%.

Telecel’s increase in SMS traffic is not nearly enough to raise hopes. They need to compete in internet and data services and that’s looking like a lost battle at this moment. 

The fact that they have only 1.2% of the LTE infrastructure means it’s an uphill battle. The 1.2% figure is not even the concerning one. Telecel has 14.1% of 3G infrastructure and so their problem is not an infrastructure one currently.

We found out from Econet’s report that only 20% of devices in the country are 4G/LTE capable. That means most of the internet and data battle is still a 3G battle and Telecel has 14.1% of that infrastructure and 0.5% of the traffic.

However, considering the many consecutive years of terrible performance there is no chance that Telecel has been keeping up with the required maintenance schedules for that infrastructure. Hence why we get many complaining about connectivity issues on that network.

To be fair, lately, Econet and NetOne are not that much better when it comes to connectivity.

As more 4G capable devices enter the market, Telecel is only going to fall behind even further. 

Costs

Telecel’s revenue figures are worrying and yet the situation could be worse if we factor in operating costs. The POTRAZ report does not give us each MNO’s share of operating costs but we know that costs have been rising faster than revenues.

Sector revenues grew by 35.1% from Q1 to Q2 and costs outpaced that with a 44.9% increase. The main drivers of this are staff costs, bandwidth costs and depreciation.

So, the situation is especially dire in Telecel’s case because they didn’t even record an increase in revenue. Yet, they most likely saw similar increases in operating costs. 

I think it’s safe to assume that Telecel is operating at a loss or best case, generating razor-thin profits.

Where is this train headed?

The only positive about Telecel from the Q2 report is that they increased their SMS traffic market share by 1.9% to a whopping 3.3%. 

That is literally the only positive to talk about. 

What do you think about this? Are you one of the 38,000 subscribers they lost in Q2? If you’re still a subscriber, what is your experience with them like? Do let us know in the comments below.

Also read:

Telecel revenues down 95% from 2015 levels, from US$14m to US$0.7m per month in 2022

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