Traffic slump bleeds telecoms

By Shame Makoshori

Zimbabwe’s telecommunication firms wrestled with difficult cash flow problems in the weeks preceding a failed data tariff hike in January, after traffic from voice slumped by almost five percent to 924 million minutes in the third quarter of 2016, official statistics have revealed.

The statistics released by the Postal and Telecommunications Regulatory Authority (POTRAZ) revealed that the exodus to data based mobile telecoms reached unsustainable levels for voice dependent operators in the final quarters of last year.

As voice traffic took a 3,6 percent battering in the third quarter to 1,149,533,489 minutes, from 1,192,571,970 minutes the previous quarter, data traffic raced aggressively, reaching 2,2 billion megabytes (MB), from 1,9 billion the previous period.

Analysts said this could have forced operators to hike data prices by wide margins, as they tried to exploit a sudden surge in demand caused by the flight to cheaper non voice telecommunications.

However, Information, Communication Technology and Courier Services Minister, Supa Mandiwanzira intervened following a public outcry and ordered the firms to reverse tariff increases.

The 2,2 billion MB was 1,4 billion MB higher than data usage in the first quarter of last year, when Zimbabweans, inspired by improved internet speeds, consumed 750,2 million MB, POTRAZ said, forecasting data consumption to double this year.

It has been a rough ride for Zimbabwean telecoms comprising of the Zimbabwe Stock Exchange-listed Econet Wireless Zimbabwe and its State run rivals, NetOne and Telecel Zimbabwe.

Econet controlled 49,4 percent market share of the 12,6 million active subscribers during the review period.

The three firms have been struggling to counter a trend whereby traffic from the traditional voice service has been plummeting.

Mobile telecoms analysts predict that this could get worse.

The industry was projected to have lost millions of dollars in the past year from customers switching to over-the-top (OTT) voice applications.

These include Skype and Lync, both of which are controlled by the global software giant, Microsoft as well as WhatsApp.

POTRAZ predicts that “2016 total data usage is likely to double that of 2015”.

Already, third quarter statistics indicate that the precipitous decline in voice traffic took place through a slump in roaming fees and outgoing international calls, which declined by 5,7 percent during the review period.

The use of Voice Over Internet Protocol (VoIP) will grow increasingly over the coming years to become the underlying technology for delivering voice over telecoms infrastructure, says Kingstone Kanyile, chief executive officer at Mtilikwe Financial Services.

The term OTT refers to the delivery of video, audio and other media from a third party to a subscriber’s cell phone.

Under this type of service, the internet service producer would be responsible for transporting bytes, which makes it cheaper than prices prevailing in Zimbabwe for subscribers using OTTs.

“Total voice traffic declined by 3,6 percent to record 1,149,533,489 minutes from 1,192,571,970 minutes recorded in the previous quarter,” POTRAZ said.

“Net on net traffic had the biggest decline of 7,1 percent. This can be attributed to the discontinuation of a number of promotions in the market as from July 2016. Incoming traffic from IAPs registered the biggest growth of 14,1 percent. This can be attributed to the trend that more and more corporates are moving to use the VoIP lines of the local IAPs (internet access provider),” said POTRAZ.

Instagram, Viber, WhatsApp, Skype, Facebook, SnapChat, WeChat, Twitter and other internet based applications remained the biggest threat to mobile firms, POTRAZ data indicated.

The period saw international outgoing calls and outbound roaming all report a decline, as the data rose by 16 percent.

It could be a bad signal for Zimbabwe’s telecom firms.

Analysts said they had three options if they were to benefit from the rich pickings which are now accruing through the switch to data by subscribers who are fleeing high tariffs in a market rated among the most expensive in southern Africa.

“The first options are to review voice tariffs down in order to reignite consumer demand, or persuade government to allow them to effect data tariff hikes, which are unlikely to be approved,” said Tapiwa Sibanda, analyst at Trade Winds.

“But they may also attempt to convince POTRAZ to allow them to return promotions that were stopped last year over concerns of abuse of social media because the impact seen today of OTT (and) VoIP services on traditional revenue streams of telecoms companies could only be an indicator of worse things to come,” he added.

Sibanda said OTT chat apps, including WhatsApp, were piling pressure on telecoms because they offer social networks that retain user loyalty.

“That is pushing people to go for smaller voice and text plans,” he added.

Zimbabwe goes for polls next year and the ruling ZANU PF party, which could face a united opposition to challenge its 37 year rule, is unlikely to approve tariffs that could leave it in conflict with the electorate.

This would work against telecoms firms.

Some governments have been disturbed by waves of public unrest, which they have alleged are fuelled by use of social media.

This could force the Zimbabwe government to consider upward tariff reviews.

Econet confirmed this after the bust up over the aborted data tariff hike with government.

“The ban on promotions was implemented against a background of regulatory concerns over abuse of social media that we are accused of contributing to through our low data tariffs,” said Econet.

In July last year Econet notified subscribers that it would be discontinuing its 7X promotion after POTRAZ said it had not been approved.

The regulator then ordered NetOne to stop running its 26X promotion.

NetOne also had a promotion based on a social media package which allowed users unlimited access to YouTube, Netflix and Skype.

However, it is not only individual subscribers that have moved to platforms other than voice. Hundreds of firms have also joined the flight, rerouting telecoms traffic to the cheaper VoIP, according to industry data.

“It has been observed that a number of companies are moving to using VoIP numbers which are cheaper in a bid to cut costs. Going forward, industry growth will largely be driven by internet and data services whilst voice telephony may continue to decline in terms of usage volumes,” said POTRAZ.

The emergence of the latest mobile telecom platforms has given respite to millions of Zimbabweans, who have been struggling to pay for high charges.

However, they have shaken an industry whose top line is being steadily eroded as subscribers abandon sim cards and ignore expensive international calls to rely on Skype and related services, even using the desktop.

Outgoing international calls and outbound roaming calls dropped, which is an indication of how bad things have become for operators.

Zimbabweans are scattered across the globe.

As a result, demand for calls was expected to remain high as people communicate with relatives and friends worldwide.

On the domestic front, the buzzing sounds of cell phones, which used to be the pride of subscribers across the country, have died down.

They have been replaced by the click of incoming text messages from platforms like Whatsapp, SMS and Facebook.

This is bad news for telecoms operators, who are hard pressed to service debts running into hundreds of millions of dollars.

Two weeks ago, Econet announced that it planned to raise US$130 million, possibly the biggest ever local capital raise, through the issue of additional shares and debt as it bids to clear foreign loans. But the company will require shareholders to make offshore payments as part of the transaction.

Econet owes a consortium of creditors – China Development Bank, African Export Import Bank, Ericsson and South Africa’s Industrial Development Corporation – just over US$128 million.

But the company says it has increasingly found it difficult to service the loans due to foreign currency shortages in Zimbabwe.

“In recent months it has become clear that there is a critical shortage of foreign currency in the overseas nostro accounts of Zimbabwe’s banks, and that the flow of local US dollar cash that those banks can export to fund their nostro accounts has diminished materially. This has made it extremely difficult for the company and its subsidiaries to service their financial obligations to lenders and creditors outside Zimbabwe,” Econet said in a circular to shareholders.

It is not the only firm to be going through a rough patch, which could be driving the push towards exorbitant data tariffs.

Alleged mismanagement at NetOne, for instance, is said to have cost the State run mobile phone operator millions.

Reports say at one point, a US$6 million investment generated US$51 000.

An exodus of subscribers that hit Telecel Zimbabwe in 2015 in the aftermath of government’s threat to cancel its licence over non payment of a US$137 million for an operating license, before it was later taken over by government, could have left the firm in a dire financial crisis.

Until its controversial takeover by government last year, Telecel did not publish its results because it was not a public company.

It is difficult to see the impact of the subscriber actions on both Telecel and NetOne, but industry sources said they were bleeding from losses.

POTRAZ said in its 2015 third quarter report that almost 60 percent of Telecel’s subscribers were inactive in the months after a brief cancellation of its operating licence in April 2015.

The situation compounded the telecommunication company’s woes, which include the sector-wide decline in fortunes due to the emergence of alternative communication platforms and a deteriorating economic environment. Financial Gazette