Zimbabwe's telcos hit by credit crunch

THE Postal and Telecommunication Regulatory Authority of Zimbabwe (Potraz) says a credit crunch and foreign currency challenges affected network expansion in the sector during the first quarter of this year.

Potraz said operators and internet access providers (IAPs) found it difficult to borrow during the period.

The sector report came after the central bank increased the bank policy rate to 40% and 30% for long-term and shortterm borrowing, respectively.

Previously, the rates were pegged at 35% and 25% respectively.

A rate increase normally attracts banks to lend to productive sectors.

But Zimbabwe's financial system has generally adopted a cautious lending strategy to avoid default risks heightened by volatilities, including hyperinflation.

"The inflationary environment, as evidenced by the rising cost of service provision has not spared operators in the sector," Potraz said.

"The credit crunch, as well as foreign currency challenges, have negatively affected network expansion and maintenance as spare parts, equipment and vendor support fees require foreign currency.

"The high cost of international internet connectivity remains a challenge as Zimbabwe is a landlocked country, accessing bandwidth from undersea cables via Mozambique and South Africa," the report added.

It said necessity for greater investment in digital technologies, skills and innovation could never be over-emphasised, noting that this was one of the key targets under the National Development Strategy 1.

During the quarter under review, total mobile operator revenues grew by 12,3% to record $13,8 billion, from $12,3 billion recorded during the fourth quarter of 2020.

However, the same quarter saw an increase in operating costs, which grew to $7,6 billion, from $5,7 billion recorded during the fourth quarter of 2020.

The rise in operating costs affected profits and limited funding for capital projects.

Revenue generated by the fixed telephone operator, TelOne grew to $1,57 billion from $1,4 billion during the quarter ended December 31, 2020.

Comparably, the fixed network operating costs increased by 76,1% to record $1,37 billion, from $775,2 million recorded in the fourth quarter of 2020.

"IAP (internet access provider) revenues grew by 48,9% to record $6,8 billion, from $4,6 billion. Meanwhile, total operating costs for IAPs grew by 26,6% to record $3,2 billion from $2,5 billion," Potraz
said.

"Postal and courier revenues increased by 5,1% to record $158,4 million, from $150,7 million recorded in the previous quarter. Operating costs grew by 31,7% to record $187 million, from $142 million recorded in the fourth quarter of 2020."

It said the rise in operating costs and lack of investments led to a mixed performance in the information communication technology sector.

For example, total mobile voice traffic increased by 3,5% to record 1,56 billion minutes in the first quarter of 2021, from 1,51 billion minutes in the fourth quarter of 2020.

Meanwhile, fixed telephone voice traffic declined by 13% to record 85,5 million minutes in the first quarter of 2021, from 98,2 million recorded minutes in the fourth quarter of 2020.

"Mobile internet and data traffic increased by 29,9% to record 21 865 Terabytes in the first quarter of 2021 from 16 834 Terabytes recorded during the fourth quarter of 2020," Potraz added.