Telecos growth slagging due to dip in consumer spending
According to the Finance Director of Vodafone Ghana, Ken Gomado, the current economic environment is putting a strain on people's ability to spend.
He told the B&FT in an interview that: “The first and the most important is consumer spending and the fact that the environment is now beginning to put a strain on consumers’ ability to spend."
According to him, the industry suffers when consumers "do not have a lot of money to spend [on recharge cards]."
Mr Gomado said the industry is still growing but at "an increasingly lower rate because of the challenges."
The rate of growth is likely to affect government revenue.
An audit study, conducted by Price Waterhouse Coopers (PwC) revealed that Telecommunications companies in Ghana paid a total of GHC1.05 billion in 2014 as tax to government.
PwC carried out the study on behalf of the Ghana Telecoms Chamber. The 2014 amount is an increase of 10,000 on 2013's amount of GHC1.04 billion.
"This contribution forms 6.9% and 5.4% of the Government of Ghana’s tax revenues for the respective years," the study observed. The Total Tax Contribution of the Telecommunications Sector, is the first study carried out for the Telecoms Chamber by PwC.
Gomado said data usage is growing while voice services is becoming elastic to consumer's squeeze.
He said: “What we are seeing is that voice services is becoming more elastic to consumer squeeze and pricing, where people are beginning to cut back. Because data is a naturally growing area, people tend to be less impacted by how they allocate resources to it. So voice will get more affected than data as we speak, because data is still in its growth phase. Voice is where you will see some sort of a flattening into a slight decline.”
Government has increased electricity and water tariffs by 59.2% and 87.2% respectively over the last three months.
In addition, fuel prices have also gone up by between 17% to 35%.
The ECOWAS common external tarrifs also came into force this month.
All of these taxes, Gomado believes have put a strain on consumers' spending.
He also added that the ability of the telecos to manage the cost base of the industry is key to its survival.
Early this month, the Mobile Money Merchants Association threatened to increase price of recharge cards by 10%.
According to the jpresident of the association, Kingsley Freelove Amoh, telcos have reduced commissions by up to five percent despite the difficult economic situation.
"It is unfortunate that the telcos will choose to decrease commissions to vendors at a time when cost of living has shot up drastically. So we will also have to protect our profits by " he said
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