The Q2 2020 sector report from the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) painted a challenging picture for the country's Mobile Network Operators (MNOs). The report indicated that MNOs incurred substantial total losses of approximately 500% and collectively saw a reduction of up to one million subscribers. Operating costs experienced a dramatic surge of about 220%, escalating from Z$5.1 billion in Q1 2020 to Z$16.1 billion in Q2 2020. Although collective revenue generated by telcos did increase by 46%, moving from Z$2.1 billion in Q1 2020 to Z$3 billion in Q2 2020, this growth was entirely negated by the staggering Z$11 billion spike in total operating costs, resulting in the reported 500% losses.

A significant contributing factor to these financial difficulties is the instability of Zimbabwe's currency exchange rate and the pervasive shortage of foreign exchange (forex). Given that Zimbabwe possesses one of Africa's weakest currencies, the scarcity of forex and the unfavorable local currency exchange rate profoundly impact MNOs like Econet and NetOne, who are heavily reliant on foreign currency to fund the majority of their operations. Essential activities such as network deployment, procurement of spare parts, and equipment maintenance demand foreign currency. This dependency has led to difficulties in paying foreign investors and clearing debts to international firms that service their infrastructure, causing intermittent network downtimes for operators like Econet and TelOne. Despite the Reserve Bank of Zimbabwe's efforts to stabilize the exchange rate through the relaunch of the interbank market in 2019, a sustained foreign currency shortage in the economy has persisted.

The high cost of international internet connectivity further exacerbates the operational challenges for Zimbabwean telcos. As a landlocked country, Zimbabwe's MNOs must access bandwidth from submarine internet fiber optic cables via neighboring countries such as Mozambique, South Africa, or Mauritius. This geographical constraint results in significantly high charges for bandwidth. For instance, Econet Wireless reportedly pays more than US$220 per 1 Mega Bit per second for bandwidth from Liquid Telecom Mauritius, while TelOne and other telcos in Zimbabwe pay up to US$120 per 1 Mega Bit per second to access bandwidth from broadband operators in nearby countries.

The report also highlighted a substantial decline in the subscriber base, with active mobile subscriptions decreasing by a million, from 13.7 million in Q1 2020 to 12.7 million in Q2 2020. This loss represents a significant 7% of Zimbabwe’s estimated population of about 15 million. This reduction followed a directive from POTRAZ for MNOs to implement tariff hikes of up to 200% for call, SMS, and data services. Econet subsequently increased its mobile service tariffs by 60%, while NetOne and TelOne both raised theirs by approximately 200%. These price increases met with protests from consumer rights groups and proved largely unaffordable for many Zimbabweans facing a high cost of living and low minimum wages. The consequences were evident in the data: voice traffic reduced by almost 30%, from 112 million minutes in Q1 2020 to 81 million minutes in Q2 2020, and 350,000 internet and data subscribers were lost from the 8.61 million recorded in Q1 2020.

In summary, telcos in Zimbabwe are grappling with a confluence of challenges, including increased operational costs stemming from foreign exchange currency difficulties, expensive international bandwidth, and a depleting customer base. While the availability of foreign exchange largely falls under the purview of the government and the Reserve Bank of Zimbabwe, MNOs may need to reassess their pricing strategies. Given the substantial loss of mobile subscribers in Q2 2020, considering a reduction in voice and data tariffs could be crucial for retaining existing customers and regaining those who opted out. Subscriber retention will be paramount for driving usage and increasing average revenue per user. Moreover, POTRAZ itself may be compelled to review its tariff hike directives in light of the adverse impact on both operators and consumers.