Rising operating costs diminishing profits for telecom companies -POTRAZ

Harare, (New Ziana) -Rising operating costs are making it difficult for telecommunication companies to make profits and impacting on investment, innovation and development of the sector, the industry regulator has said.

The Postal and Telecommunications Regulatory Authority (POTRAZ) said this in its 2023 annual report.

It said the hyper-inflationary environment that prevailed in 2023 posed significant challenges across the sector, resulting in significant increases in the cost of providing services.

“Revenue to cost ratios diminished for most operators, which is a signal for diminishing profitability across the sector. This is a worrying situation, which calls for consistent alignment of service charges to the increasing cost of service provision. Unless this problem is addressed, profitability will continue to diminish with implications on sector investment, innovation and development,” it said.

Data usage rose by 50.7 percent last year, but operators are not able to invest enough to meet demand, Potraz said.

“Demand for internet/data is expected to grow significantly in 2024, spurred by the growing popularity of data-intensive applications such as Netflix, Facebook and Tiktok. However, progress for the sector will also depend on the extent to which operators adopt newer technologies such as Artificial Intelligence for strategic decision-making,” it said.

Potraz said the total number of active mobile subscriptions grew by 4.7 percent to 14,973,816 in 2023, from 14.300.790 recorded in the previous year.

“Resultantly, mobile penetration rate grew by 3.3 percent to 97.5 percent, up from 94.2 percent recorded in the previous year,” it said.

The total number of active Internet/data subscriptions as of 31 December 2023 was 11 240.969, translating to a 15.4 percent increase from 9,914,950 active subscriptions, as of 31 December 2022.

Potraz said the total postal and telecommunications sector revenue for 2023 amounted to ZWL40 trillion, up from ZWL428.7 billion recorded in 2022.

On the other hand, total postal and telecommunications sector operating costs amounted to ZWL2.5 trillion in 2023, up from ZWL278.1 billion recorded in 2022, giving an annual variance of 801.7 percent, which translates to an inflation-adjusted increase of 172.6 percent.

Potraz said the country is still lagging in the deployment of Long-Term Evolution (LTE) base stations, hence the need to ensure that operators remain profitable to enable them to invest in high-speed networks.

“On its part, the regulator will continue to pursue the principle of technological neutrality in its licensing processes as well as foster infrastructure sharing aimed at increasing competition and innovation. For the postal sector, there is a need to foster adoption and promotion of e-commerce to boost parcel and courier volumes,” it said.

New Ziana