‘Dollarisation’ aids network investment in Zimbabwe

The use of foreign currency as legal tender in Zimbabwe has been of great benefit to the country’s telecoms sector, according to Research & Markets. Zimbabwe’s economy has contracted for ten years in a row under gross mismanagement by its political leaders, sending annual inflation to an unprecedented rate of several billion percent and the exchange rate of the Zimbabwe dollar to more than 50 billion per US dollar. In 2009 the government finally gave up and allowed foreign currencies as alternative legal tender, which had already been the unofficial fuel of the local economy for years.

The ‘dollarisation’ has done miracles for the country’s telecom industry: network operators, now able to bill their customers in hard currency, have regained a certain degree of planning reliability and access to funding for network expansions. Hundreds of millions of US dollars are now being invested into the three mobile networks – Econet, NetOne and Telecel Zimbabwe. Mobile penetration has tripled within 18 months to reach 40% in mid-2010, despite the fact that consumer prices initially rose – artificial price caps in local currency had meant that prices had previously been extremely low when converted into hard currencies. As a consequence, the average minutes of use on Zimbabwe’s mobile networks were ironically among the highest in the world, and the networks were congested. Prices are now more in line with other African markets again.

The normalisation of Zimbabwe’s economy is reflected in the International Monetary Fund’s (IMF) forecast of continuous GDP growth at 6% from 2010.

NetOne’s parent, TelOne (formerly PTC) still holds a de-facto monopoly on fixed-line services in the country. A second national operator (SNO), TeleAccess was licensed in 2002 but had its licence withdrawn in 2005 due to non-performance resulting from difficulties to raise funding. Another licensed operator, Afritell (a public-private partnership) also failed in bringing competition to the fixed-line sector. However, the government has announced that it recognises the urgent need for a second operator and that it is looking at ways to resuscitate or retender the licences.

In parallel, the government is planning to privatise up to 60% of TelOne and NetOne, either through an IPO or a strategic partnership with a foreign investor.

Despite the limited fixed-line infrastructure, Internet usage in Zimbabwe has continued to rise. In an environment of strictly controlled traditional media, citizens turned to the Internet for independent information and communication. However, limitations of international bandwidth for the landlocked country have affected development of the sector. New fibre optic links are now being deployed to improve international connectivity via neighbouring countries with access to international submarine fibre optic cables.

The ISP market is reasonably competitive with six major players. Eight companies have been licensed to provide VoIP telephony services. Several data carriers have been licensed and are rolling out national fibre backbone networks. ISPs have begun rolling out wireless broadband access networks, and the first 3G mobile broadband service in the country was overwhelmed by demand within weeks after launch.

After ten years in crisis, Zimbabwe’s telecoms market has a lot of catching up to do. The boom in all market sectors is expected to continue.

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