daniel chigunwe
Nelson Gahadza
Zimbabwe’s internet penetration growth has been an ongoing trend as users continue to shift from consumption of voice-centric services to data-centric services.
This is coupled with increased expansion of digital services, remote working, online learning, growing internet of things, and streaming services, amongst other factors.
According to industry regulator, the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) first quarter 2024 report, active data/internet subscriptions reached 11 552 928 from 11 240 969 recorded in the fourth quarter of 2023, while the internet penetration rate was 75,36 percent at the end of the quarter.
With Starlink now officially available in Zimbabwe, it remains to be seen how disruptive its service shall be to a sector currently dominated by Liquid and Econet Wireless Zimbabwe over other players NetOne, TelOne, Dandemutande and Telecel.
Data affordability and intermittent connectivity have been the major challenges within the country’s telecommunications value chain.
Sector players and experts confided to Business Weekly that Starlink will eat into the data revenues of existing providers and, to some extent, voice revenue as consumers adopt WhatsApp voice calls should Starlink internet prove efficient.
Malone Gwadu, a financial economist, told the publication that Starlink is an innovative game changer in the telecoms space both currently and in the medium to long term due to its disruptive capabilities.
“Starlink’s entrance into the market will cause serious market re-pricing as it offers lower cost (relatively) and much more fast-paced internet service.
“Such convenience will naturally stampede consumers towards it. This will be an immediate threat to existing telecom companies such as Econet, a blue-chip listed company,” he said.
He added that headline income in the near term may dwindle unless serious defensive innovations are offered to the market and new strategic partnerships are lined up, especially with Starlink’s competitors globally.
According to Equity Axis, a financial and equities research company, Starlink offers high-speed satellite internet, presenting a potential alternative to the often-unreliable terrestrial providers with the possibility of driving pioneers out of business in the long run.
“Since Starlink’s launch, Liquid Intelligent Technologies, the largest internet access provider in Zimbabwe with an 80 percent market share, has reduced its unlimited internet packages by as much as 45 percent, aiming to improve data affordability for Zimbabweans.
“TelOne also announced plans to introduce flexible pricing models to remain competitive while making internet access more affordable as low-earth orbit (LEO) technology becomes increasingly available in the country,” Equity Axis said.
Potraz, in its report, said the internet penetration rate has been on an upward trend spurred by the continuous uptake of Internet/data-centric services as well as increased investment in infrastructure, like fibre-optic cables and the rollout of LTE and 5G mobile networks.
In addition, it said the Government has implemented programmes and policies aimed at increasing Internet access and usage, such as the National ICT Policy and the Digital Transformation Strategy.
Furthermore, Zimbabweans now rely on the Internet for activities like e-commerce, online banking, education, and entertainment, resulting in increased adoption of Internet services.
Econet, in its recent quarterly trading update, said share of data revenue increased to 42 percent of mobile network revenues.
However, the company said it is unfazed with the recent entry of Starlink into Zimbabwe, as the mobile telecommunications and technology company has quietly positioned itself to go head-to-head in competition with the low-earth-orbit satellite broadband provider.
Econet recently introduced SmartBiz broadband packages that are designed to address the connectivity needs of various business categories, including small and medium-sized business enterprises, SMEs, farmers, schools, artisanal miners, and churches across the country.
Econet said its SmartBiz offers high-speed broadband data services at competitive prices, starting from just US$45 per month. The package provides unlimited, high-speed internet at a fixed rate, with other tiers available for US$87, US$167, up to US$417 50Mbps.
These compare favourably with Starlink’s main packages, which include a once-off US$350 fee for the startup kit, plus US$50 a month for the standard residential package, US$100 a month for the roaming package, US$71 for the business priority package (40GB), up to the US$200 a month business priority package for unlimited data.
Investment analyst Batanai Matsika said the impact of Starlink will largely depend on the rate of penetration of the Starlink devices, which are currently still on the high side in terms of the kits.
“So it will depend on how it will penetrate the households and businesses. But there is going to be an impact on Econet and their sister company, Liquid Telecoms, and other internet providers,” he said.
He said the Starlink deal and impact are yet unknown, but it is just a technological disruption; however, there has been a trend from a business and individual point of view to have voice calls on WhatsApp.
“This could be disturbed if the Starlink internet is efficient and people resort to WhatsApp calls. That will eat into voice revenues in a big way, and if trends continue, it will be disruptive for Econet and other players,” said Matsika.
According to Potraz, total mobile voice traffic contracted by 1.27 percent from 3,11 billion minutes recorded in the fourth quarter of 2023 to 3,08 billion minutes recorded in the first quarter of 2024.
However, according to our sister publication, Chronicle, a senior Econet executive said the company was ready to compete in the market by continuing to focus on purposefully bridging Zimbabwe’s digital divide.
“With our extensive 4G and 5G network infrastructure, further bolstered by ongoing nationwide upgrades, SmartBiz is designed to empower enterprises of different sizes across the country,” Kezito Makuni, Econet Wireless Zimbabwe chief operating officer, said.
Tinashe Mukogo, a financial services expert analysing the impact of Starlink on Econet Wireless on his X Handle, said telcos need to borrow and build and maintain network and infrastructure because the industry is a capital-intensive business.
After the investment, they enter the Sell stage, and now with the emergence of Starlink, the “sell” cycle for telcos like Econet Wireless Zimbabwe (EWZ) will be impacted as Starlink may eat into data revenues.
“But this disruption also depends on how much revenue Econet gets from data. So with Starlink coming in, it will certainly eat into some of Econet’s customer base, but I think overall there will be an increase in data revenue as more people use packages like the Smart Biz package, which fits most users’ needs.
“So margins on data will be lower due to pricing competition, but the increase in volumes may mean the business is not too badly affected,” he said.
Mukogo said data revenue was a growing source of revenue for Econet; hence, he would have preferred to have less competition.
Enock Rukarwa, an investment analyst, said the introduction of Starlink is a welcoming development in Zimbabwe as it ensures improved internet connectivity and economic development through impacting related value chains in the economy.
He said data affordability and intermittent connectivity have been the major challenges within the country’s telecommunications value chain, and the coming in of a new player should be able to push prices lower and enhance product quality.
“The deployment and maintenance of Starlink ground infrastructure is another key enabler for job creation in the economy going forward.
“Starlink is coming with competitive prices; this will ultimately force existing telcos to lower their prices, thereby thinning respective margins.
“However, this is a positive externality to the broader economy as it forces existing players to ramp up marketing and promotional efforts,” said Rukarwa.
Gamuchirai Hogwe, an Equities Research Analyst at IH Securities said the availability of Starlink will have different implications across different market segments for instance there is a low-income segment that currently uses data from MNOs as fibre and broadband services remain out of their reach.
She said for this segment, the initial startup kit fee presents a barrier to entry as customers may not have liquidity to make the once-off payment.
“Similarly, Starlink may boost connectivity in underserved remote areas not currently supported by existing infrastructure.
However, for a significant chunk of the urban customer segment, including businesses, Starlink provides a faster, more reliable alternative to currently available services. This is the segment in which MNOs and internet providers stand to face the most competition both in the short and long term,” Hogwe said.
She added that already, we have seen internet providers come under pressure to reduce their tariffs in a bid to defend their customer base and this, however, may further impede their already hamstrung efforts into infrastructure investment, further making their services less competitive.
MNOs and internet providers have long cited capital constraints as a reason for less-than-optimum poor service provision.
Hogwe said reducing tariffs is inevitable for local providers in the long term hence their strategies now should focus on innovation and investing in competitiveness.
She said they need to safeguard their urban customer base by addressing the customer’s main pain points such as price and internet speeds.
“Existing players need to find innovative ways to decrease their cost base whilst also seeking some strategic partnerships to make their product more competitive.
“Earlier this year, Liquid Intelligent Technologies announced a partnership with Eutelsat Group which will see the group provide LEO satellite services in Africa. While this is not yet available in Zimbabwe, it points to the direction that all players should be taking to safeguard their customer base,” said Hogwe.
Bongani Ndlovu