Econet sees 58% and 19% increases in data and voice usage but posts losses, blames low tariffs

Econet Wireless has been on a mission to diversify its portfolio of service offerings over the years. They say they want to be a “fully-fledged digital services provider.”

They are not yet there and we could debate the progress they have made so far but the fact remains, for now, voice revenue remains important to their bottom line.

However, it is encouraging for them that data revenue continues to grow its contribution to group revenues.

Econet reports that for the year ended February 2023, voice usage increased by 19% from the previous year. Data usage increased by a more impressive 58%.

Data usage

Econet’s data service quality has been subpar for a while now and that was the case in 2022. Yet, for all the outages, service disruptions and slow speeds their customers experienced, data usage still increased by 58%. Impressive stuff.

I imagine by data usage, Econet means ‘data bought’. If you buy a 250MB daily data bundle, that would be recorded as data usage of 250MB, regardless of how much of it you actually used. I could be wrong but I think that’s likely the case.

If not, it would mean it’s the actual data used. Let’s say one used 180MB of that 250MB bundle, and Econet recorded 180MB as data usage. That would mean Econet has records on how much data expires before it’s used.

Okay, either way, they have that data and I would really love to see that information. We get all sorts of complaints from Econet customers on how slow internet speeds and power cuts mean their bundles expire unused sometimes.

It would be interesting to see just what percentage of data expires untouched. Some argue that it doesn’t matter if that percentage of low or high, Econet needs to extend data validity periods in these times of sketchy service and power cuts, at the very least.

Tariffs

Voice and data revenue contribute the lion’s share of Econet’s revenues. So, it is telling that in a year where both voice and data usage increased, Econet ended up turning a loss. What gives?

Econet argues that the tariffs they are being forced to charge by their regulator are too low. This has been Econet’s song for a while now but they are kicking the drama up a notch. Says Econet chairman J. Meyers,

The prevailing tariff environment is a threat to the long-term viability of the local telecoms sector…

He lays out his case,

The Regulator granted the sector three tariff adjustments of 61% each and a fourth adjustment of 50% during the year. The tariff adjustments were not adequate to offset the increase in inflation which closed at 230% in January 2023.

It all sounds like a valid argument to me. Tariffs are adjusted so infrequently in Zimbabwe that there is no way they can possibly keep up with inflation. We have argued the same before.

So, this tariff situation is responsible for Econet reporting a loss in a year where data and voice usage increased. Case closed, right?

The tariffs are actually too high

Well… We looked at the tariffs that Econet says are a threat to the long-term viability of the telecoms sector. In February 2023, the last month of the reporting period in question, here is what it looked like,

• Econet’s monthly data bundles cost this much:
• $10478.76 for 1400MB [that’s about US$10.48 for 1.4GB. My friend, that’s $7.50 for a Gig. If that’s too little, I shudder to think what Econet would have us pay in their perfect world]
• The Private WiFi bundles are cheaper but not necessarily cheap. You pay $18557 for 8GB [that’s about US$18.50 for 8GB or US$2.30 for a Gig.]

We also looked at Cable’s research which showed that in the region, Zimbabwe had the highest average price per GB.

• Zimbabwe – $4.26
• South Africa – $2.04
• Mozambique – $1.33
• Zambia – $1.36
• Malawi – $2.42
• Kenya – $0.84

So, in light of this, I struggle to sympathise with Econet on this tariff issue. It appears it is us, their customers, who are getting the short end of the stick. They will still argue the following,

The disparity between the revenue growth and EBITDA margin is reflective of the sub-economic tariff environment coupled with accelerated exchange rate depreciation

However, they could be blinded by this tariff issue causing them to miss the actual thing responsible for data and voice usage increases resulting in losses, beyond exchange rate losses that is.

They mentioned power cuts and tough economic conditions. Perhaps these are to blame, as the tariffs seem to be beyond reasonable.

What do you think though? What do you make of Econet increasing data usage by an impressive 58% and still posting losses? Do you agree that it’s a tariff problem? Let us know in the comments section below.

Also read:

Are Econet and NetOne really saying US$7.50 or US$6.54 for 1GB is not economically sustainable?

Econet posts $17b (US$15m) loss, down ZW$57b from last year’s profit, actual position likely worse