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The cost of the internet outage; over K1 million at risk

Zambian Kwacha
Zambian Kwacha
Zambian Kwacha

As we reported certain parts of the country had an extended internet outage lasting between 48hours and 72hours. The outage was limited to Southern and North Western provinces. According to feedback from our readers, the following networks were affected; Airtel, MTN and Zamtel. Interestingly the outage did not impact the fixed line providers such as iConnect, Microlink and Paratus.

Internet Outage
Internet Outage

Interestingly the outage did not impact the fixed line providers such as iConnect, Microlink and Paratus.

Data revenues are now growing both in terms of overall revenue share and revenue growth it is in the Mobile Network Operators (MNOs) interests to protect and grow them. Data and the associated revenue should be at the fore of every MNOs CEO to grow, get people to consume more. In conjuction with that the service must be available 24/7 and everywhere. A 48 hour outage that does not result in an announcement by the relevant CEOs or their marketing team is very concerning, are we the consumers not worth the time or are we taken for granted? The consumer may be ignored and paried off with vague responses, the bottom line cannot.

MTN Zambia

I decided to take a look at some numbers from the regulator to work out the potential impact of a 48 hour internet outage on the revenues of Airtel and MTN. Firstly, some high level numbers from ZICTA:

  • 11, 309, 494 mobile subscribers
  • 5, 715, 493 mobile internet subscribers
  • 2016 Q2 revenue K1, 051, 562, 000.00 (K1 billion)
    • Approximately K300million per month or K10million per day

The stated Mobile internet penetration currently stands at 35.60%. I cannot give accurate information without being inside the individual MNOs to break down the number of customers under each tariff rate, but I can make educated calculations. The basis for my method will be quite simple; overall revenue – voice and SMS revenue. The list below contains the breakdown of voice minutes for Q2 in 2016:

  • Domestic incoming voice minutes 240,719,028
  • Domestic outgoing voice minutes 3,391,947,639
  • International incoming voice minutes 23,853,709
  • International outgoing voice minutes 20,139,806
    • Total voice minutes 3, 676, 660, 182

Now that I have the total number of voice minutes blended across the different categories I can come up with an average cost for voice. The costs below are calculated at per minute rate and combine the various special and promotional rates available across operators networks.

  • Voice on-net peak K1.14
  • Voice on-net off-peak K0.79
  • Voice off-net peak K1.26
  • Voice off-net off-peak K1.06
  • Effective voice tariff K0.53

Working from the 2 totals; effective voice tariff and total number of voice minutes I can work out the voice revenue for the quarter.

  • Total voice minutes 3, 767, 660, 182
  • Effective voice tariff K0,53
    • Total voice revenues K1, 996, 859, 896.00

Another important line in the MNOs revenue make-up is SMS revenue. SMS will never die 🙂

  • Total number of SMSs 1,454,106,003
  • Average SMS on-net price K0.18
  • Average SMS off-net price K0.26
    • Average SMS price K0.22
    • Total SMS revenues K319, 903, 320.60

Now that we have the 2 main revenue pillars broken down, we add them up to find out the revenue. Total voice and SMS revenue is K2, 316, 763, 216.00. I do acknowledge that I have had to rely purely on blended values to come up with a number. With no insight into their financials this is the best I have to work with.This quickly revealed a glaring anomaly where the calculated revenue is greater than the declared revenue for the quarter.

  • Calculated revenue K2, 316, 763, 216.00
  • Declared revenue K1, 051, 562, 000.00

Either the numbers posted by the regulator are incorrect or the operators discount a huge percentage of the 3,391,947,639 on-net voice minutes. To then tackle the problem I decided to look at this a different way. The new way entailed looking at overal figures and not calculating the revenues from the bottom up:

  • Total number of subscribers 11, 309, 494
  • Total reported revenue K1, 051, 562, 000.00
  • ARPU for the quarter K92.98

ARPU, is average or annual revenue per user but since the time period under review is a quarter I will define it as Average Revenue Per User. This the amount each subscriber spends with the MNO, calculated by dividing total company revenue by the number of active network subscribers. That means each user spends K30.99 with their respective network provider each month for all services, excluding mobile money. I do know that the impacted segment of the market is a subset of the overall population.

  • North Western Population 727,044
  • Southern Province 1,589,926
  • Mobile internet penetration 35.6%
    • Affected population 810,940

I then took the affected population and multiplied it by the daily ARPU rate of K1.00. The projected revenue at risk for the period of the outage was K1, 621, 879.00 across all the mobile network operators. Looking at data spend as a subset of a user’s total communications spend is very difficult. However, we do know that the operators did lose a percentage of the K1,6million kwacha over the 2 day period but have still not bothered to explain why.

I hope their shareholders get a better reason than we did!

Airtel Zambia
Airtel Zambia

 

Statistics Source:ZICTA
IMG Source: The Post Zambia