Wednesday, January 19, 2011


By Samuel Kamndaya, The Citizen Reporter

Dar es Salaam. Tanzanians spent a staggering Sh555 billion ($396 million) on telephones in three months, according to a new report by the Tanzania Communications Regulatory Authority (TCRA). That is an average of Sh185 billion per month.

That money was spent between July and September last year, the period covered by the quarterly telecommunications reports drawn by TCRA.

According to the report, the sum comprises cash that left the pockets of about 20,771,487 subscribers who were, by September 2010, receiving services from seven telecommunications companies, namely: Vodacom, Airtel, Tigo, Zantel, TTCL, Sasatel and Benson Informatics (BOL). The subscribers’ expenditure cover both voice communications as well as short message services (SMS).

The amount is slightly higher than the total government revenue for the whole month of September 2010 of Sh502.5 billion. In the preceding quarter (April-June, 2010) Tanzanians spent Sh37.475 billion less in telecommunications, a strong signal that telephone number registration and telecommunication companies tariff battles did not have a negative impact to the firms’ revenue as previously thought.

According to the report, the amount of money, on average, that the country’s seven telecommunications companies brought in from each client (Average Revenue Per User - ARPU) stood at Sh26,724 during the three months from July to September, 2010.

During the second quarter of 2010, the country had a total of 19,592,795 subscribers. The ARPU for April to June 2010 was Sh26,419, indicating that Tanzanians spent an estimated Sh517.622 billion on both voice and text messages between April and June, last year.

However, TCRA says the amount should not be mistaken with the companies’ actual profits.

“If you calculate, you really get a huge amount but that does not reflect the profits that the companies make…the amount also encompasses what the firms spend on investment activities, taxation, salaries and other expenditures,” the TCRA director general, Prof John Nkoma told The Citizen.

He said poor infrastructure was eating into the companies’ profitability.

“In some areas, there are no roads so they have to construct their own roads as they seek the right place on which to build a tower…power is yet another problem… they really collect a lot of money but they also spend a lot of money at the same time,” he stressed.

Vodacom remained the market leader, boasting 8,426,097 subscribers while Airtel remained in the second slot with 5,901,634 subscribers as Tigo came third with 4,575,534 subscribers. Having recorded a historic 1,888,739 subscribers in June 2010, Zantel may have failed to go on with the tide.

The company lost 302,223 subscribers between July and September to remain in the fourth place, although with 1,586,516 subscribers. Tanzania Telecommunication Company Limited had 256,064 subscribers while Sasatel had 23,071 subscribers as BOL seems to be nowhere close to any competing giants. It increased just 165 new subscribers between July and September to bring the total number of its clients to just 2,571.

The amount of tax, paid by telecommunications companies during the third quarter of 2010, could not be immediately established. However, most of them fall under Tanzania Revenue Authority’s (TRA’s) Large Taxpayers department (along with all major companies in the country) which paid a total of Sh490.867 billion between July and September 2010, according to TRA figures.

Economists say spending on telecommunications may help nurture the growth of a country’s economy, noting however, that the growth depends on a number of factors.

Research indicates that increasing penetration rate of telecommunications services by 10 per cent pushes a country’s gross domestic product (GDP) up by 1.2 per cent.

“But to ascertain if this is the case in Tanzania, we also have to look at three factors,” said Prof Humphrey Moshi of the University of Dar es Salaam’s Economics Department.

The factors include ownership of the telecommunication firms, investment guidelines and the level of transparency in operations of the companies.’

“If locals own a good number of shares in such companies… if the investment guidelines don’t offer tax holidays to investors in the sector and if the firms do not cheat regarding whether or not they make profits so they can pay tax, then it is obvious that the sector may really add a special impetus to GDP growth,” he said.

He said with numerous promotions, for which subscribers pay hugely, it was vivid that the sector was not only collecting massively in revenues but that the firms were also making good profits.

“Just imagine, how many people pay Sh300 at one time in a promotion that the winner is awarded a vehicle… how much does the company make in exchange for one vehicle…how many people pay 20 per cent more after being given airtime on credit…they really make a lot of money,” he said.

Meanwhile, Prof Nkoma played down assumptions that the ongoing price wars may have far reaching ramifications on the growth of the telecoms sector, saying all he knew was that no businessperson will charge below his operational costs.

The price wars, which began with a Sh1 per second tariff almost four years ago, was rekindled late last year with at least three operators dropping their tariffs to less than Sh0.5 per second.

My Take

We are capable on spending a lot into non-basic things. Imagine if we spent such amount in building schools, hospitals, dams, improving sanitation and sewerage systems, city planning, operational research, Improving infrastructure, Agriculture, Community based development conscience being instilled amongst ourselves via media outlets and so on. Instead we are heavily investing on corruption, poverty, tribalism and religious differences for what and for the benefit of whom? Where is our Tax being allocated?


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