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.
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$430,000) for the whole quarter.
We see that all across the board, operating costs are spiralling. Revenues could not keep up with operating costs in Q4 2022. All sectors recorded operating incomes but we don’t know what the picture would look like after taxes and the like.
All we know is that some of the companies above are in the red. A few players dominate these fields and some of those that are struggling have the benefit of not having to publish their financial results. So we will never know their exact position.
So, dear customer of these companies, do you think you could cut them some slack or will you maintain that you are getting the raw deal? After all, we are still talking about millions of US dollars in profit for some of these companies. Let us know in the comments sections below.
Also read:
Does Econet’s 1130% profit increase even mean anything? Benefiting from relatively low tariffs?
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12 comments
Yaa Zim is not stable for doing business using the ZWL$
It’s difficult business environment but the rate of increases in internet charges have not been proven to be fair; most of the rates increases for USD bundles have been double digit increases which is contrary to increases in inflation in terms of USD that is in mere single digits.
The only explanation left will be huge increases are being caused by greed corruption and incompetence.
This article does not look at 2 important factors, the biggest overhead is POTRAZ licensing, the cost of 1Gbps (speed) unlimited from South Africa is about 50 USD. In Zimbabwe 1 Mbps(0.001Gbps) dedicated costs 300 USD that’s close to 10000 times the price in neighboring South Africa. The price is before the new cables that have come online namely Equiano. Over the years there have been CDNs and peering which has brought down the costs of Internet significantly. POTRAZ is charging a huge fee for entry as well as for operating, If POTRAZ reduces the costs of fees, licences etc it will result in lower costs which will in turn increase internet penetration, which will also increase GDP. POTRAZ is the main culprit of why Zimbabwe has the Highest Cost of Internet in the world. India reduced the internet costs by 95%, this has lead tomany tech achevements. It would be nice to have a Regulatory fee comparison from country to country. Zimbabwe will definately top with a huge margin.
Licensing and taxes are the costs that we as Zimbabweans have to pay for concentrating development and economic opportunities only in certain parts of the country. Part of your internet subscription has to subsidize (subpar) basic services in less developed parts of the country.
And also you put a sub headline “ZIMPOST” yet you mention nothing about the company in particular.
Every arm / parastatal of the Zim government is the core problem to why we are in this conundrum. Ever asked yourself why do they charge such exorbitant fees without any solid and tangible justifications i.e ZIMRA, ZINARA, POTRAZ etc. E.g duty is to be paid in order to cushion the manufacturer of the goods in question (being imported) we don’t have a car manufacturer in here why are we paying twice as much. Let’s not even mention the retrogressive taxes
No mention of the tax rates?
I’m surprised that the figures are quoted in zw$ yet more and more people are using us$ to buy airtime and also when paying for their internet services. I think potraz and the companies are sort of lying to us.
It’s because the law says that all financial statements must be calculated and shown in the official currency of the nation.
And the Zimbabwean $(bond?) is the official currency and only currency of the land even though the reality on the ground is very different.
Can I have the report in PDF on my email address issarichie@gmail.com
TelOne has so much potential. They have everything they need to be the top dawg in IAPs but it is run by people with no vision. It is exactly like Liverpool. Exceptional attack, mediocre midfield and an uninterested defense.
So operating costs have increased?
Enough to justify 2x 50% rate increases in 2 months?
I don’t think so…….