Zim telecoms in grief over Skype, WhatsApp
A WAVE of alternative telecommunication platforms like WhatsApp and Voice-Over-Internet-Protocol (VoIP) solutions turned the heat on Zimbabwe’s mobile telecoms industry during the third quarter of 2015, undermining an industry that has been a huge contributor to the fiscus.
The emergence of these platforms has given respite to millions of Zimbabweans struggling to pay for a range of telecommunications services in one of the most expensive markets in southern Africa.
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.
The industry’s fears have been confirmed by a string of statistics pointing to a slowdown in the country’s mobile telecoms sector, which surrendered close to US$700 000 in revenues in only three months, according to data released by regulator, the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ).
Analysts said the figure could translate to millions in lost revenue for a full year.
The regulator says the country’s three mobile firms, Econet Wireless Zimbabwe, Telecel Zimbabwe and NetOne, trimmed revenue by a combined US$655 714 to US$182,5 million during the third quarter of 2015, after reporting US$183,1 million during the second quarter.
Viber, WhatsApp, Skype and a range of other internet voice applications, reveals the report, were among the biggest threat to mobile firms during a period that saw incoming international calls decline to 67,8 million, from 68 million the previous quarter.
Outgoing international calls took the biggest battering of 1,2 percent to 25,5 million from 25,8 million the previous quarter.
“International incoming and outgoing traffic declined by 0,3 percent and 1,2 percent respectively,” said POTRAZ.
But international calls were generally expected to rise as more Zimbabweans left the economically troubled country to join 3,3 million nationals that have already fled as growth opportunities continue to shrink.
“The decline in international traffic is attributed to the proliferation of alternatives for communication such as WhatsApp and VoIP solutions such as Skype and Viber,” the report said, revealing a 4,7 percent rise in the number of subscriptions to the internet.
There were 5,8 million internet subscribers during the second quarter, but this number rose to six million during the review period, according to POTRAZ.
Active fibre links subscriptions rose by 53,4 percent and VSAT sign ups increased by 10 percent.
xDSL subscribers rose by 8,2 percent while subscribers to LTE moved by a huge 5 424,3 percent, according to POTRAZ.
The sustained slowdown in revenues was also reported from roaming fees.
According to analysts, it is only going to get worse as customers migrate to over-the-top (OTT) voice applications, which include Lync and Skype.
“The industry will not be able to reverse this. It is a natural trajectory,” said telecoms experts, Kingston Khanyile, the chief executive officer at Mtlikwe Financial Services.
“The industry is heading for a shake up. For many years telecoms firms did not think things will change. Zimbabwe has a high literacy rate and subscribers are quickly adapting to new technologies. It is only in Zimbabwe and other African countries where you find operators still relying on voice, which is an outdated model. Consumers will continue to have bargaining power,” Khanyile said.
OTT is defined as the delivery of video, audio and other media from a third party to a mobile phone which leaves the mobile phone network only responsible for routing messages.
Experts say the surging demand in these OTTs has been underpinned by several factors, such as improved speed and availability of broadband networks.
All these factors were at play in Zimbabwe’s mobile telecoms landscape during the review period.
POTRAZ indicates that the bulk of the industry’s revenue was still contributed by voice, which accounted for 60,1 percent.
The growth in mobile data revealed why there was a slowdown in international calls.
“Mobile data utilisation increased by 20,3 percent to record 944,268, 192MB from 785,058, 782MB recorded in the previous quarter. This increase shows growing demand for internet services in the country. The total national voice traffic increased by 8,8 percent to record 1,3 million minutes from 1,2 million minutes recorded in the previous quarter. This increase was mainly driven by the increase in net-on-net traffic owing to net-on-net promotions,” the report added.
The impact of VoIP on the three mobile phone firms’ revenues could just be a tip of the iceberg, according to researchers at Mtilikwe.
They say the use of VoIP would rise in a few years, and these are projected to become the underlying backbone for transmitting voice to customers over telecoms infrastructure.
“It is only a fool who will try to block them,” said Khanyile.
Until solutions are found to counter this threat on an industry that is already overtaxed and among the most expensive in terms of licencing, the rise of these technologies will dictate the pace of growth in the coming years.
Telecoms operators in Zimbabwe pay US$137 million for a 20-year operating licence.
The trouble is, the slowdown in disposable incomes registered in the past five years after a liquidity crunch hit the country has crippled revenues and consumers’ capacity to keep their lines active.
Out of a combined 19 million subscriber base recorded by POTRAZ during the review period, only 12,4 million lines were active.
This translates to 35 percent of the number of subscribers that were not active, according to the report, highlighting that consumers could be unable to pay for air time, and had abandoned their lines.
Vast amounts of capital and equipment had been imported to satisfy a rising appetite for mobile phone services, especially voice, which has been boosted by the rise in mobile money transfer services.
NetOne says between 2009 and 2015, it had invested over US$214 million in network expansion.
Through the growth that has ensued, vast economic benefits have accrued, with Econet alone revealing last year that its vast network supporting 9,2 million subscribers had created 35 000 employment opportunities for individuals selling airtime recharge cards, work in 250 branded shops, 19 000 dealer agents and 1 100 green kiosks.
EcoCash, Econet’s mobile money transfer solutions provider, says its footprints can now be traced to 20 000 locations countrywide, in one of the most remarkable growth stories for a single sector since 2009.
During the half year ended August 31, 2015, Econet Wireless said revenues declined by 17,7 percent to US$323 million, after reaching US$392,3 million during the prior comparative period in 2014.
Pretax profits dropped 52 percent to US$23,8 million, from US$49,6 million the previous year, highlighting a slowdown also seen at NetOne, which reported for the half year ended June 30, 2015.
Earnings before interest, tax, depreciation and amortisation slowed by 21 percent to US$122,5 million, from US$155 million during the same period the previous year.
Econet chief financial officer, Roy Chimanikire, acknowledged this drop was a result of the tremendous knocks mobile phone firms were taking from the slide in voice revenues, as consumers shifted to the cheaper platforms.
Facebook, for example, said last year that its active user population in Africa increased by 20 percent to about 120 million in September 2014.
Millions of Zimbabweans were among the subscribers that opened accounts to communicate via the platform.
It said more that 80 percent of account holders accessed the social network platforms through their mobile phones across the continent.
For instance, Econet’s broadband revenues slid to US$52 million during the review period, from US$56 million during the corresponding period the previous year.
Chimanikire blamed a directive by POTRAZ for the industry to reduce tariffs for contributing to the slowdown in revenue.
But already, some analysts in Zimbabwe are questioning the logic behind blaming regulatory interventions for the decline in voice revenues.
“Ninety percent of revenues of subscribers are pre-paid customers and the effective tariffs are very low on account of the bundles and promotions characterising the airtime price war,” said an analyst with online news service provider, ZFN.
“It is commendable that Econet chief executive officer Douglas Mboweni and his team are looking to diversify revenues although it is cause for concern that broadband data, which used to be a strong growth area and pillar of the diversification plan, has not only bottomed out but registered a decline in revenue,” ZFN said.
Meanwhile, the country’s mobile money transfer platforms lost a combined US$54 million in deposits during the third quarter of 2015, even as the electronic funds transfer industry witnessed phenomenal growth in subscribers and agencies during the review period.
Ecocash, Telecash and One Wallet are among the mobile money transfer platforms in Zimbabwe, with these three being units of Econet, Telecel and NetOne, which together controlled close to 20 million subscribers during the review period.
POTRAZ said total deposits in mobile money transfer services retreated by 10,5 percent to record US$458 million during the review period, from US$512 million the previous quarter.
During the same period, POTRAZ said the number of mobile money subscribers rose by 7,1 percent to 6,7 million from 6,2 millon reported during the second quarter of last year, while the number of agents moved by 6,9 percent to reach 29 775 from 27 862 recorded in the previous quarter.
“However, total deposits on mobile money platforms declined by 10,5 percent to record US$458 million from US$512 million recorded in the previous quarter. Although mobile money subscribers have been increasing, mobile money deposits have been experiencing periodic fluctuations,” POTRAZ said.
Follow us on Twitter on @FingazLive and on Facebook – The Financial Gazette