Telecoms industry hit by lack of foreign currency

20 Jun 2012

A shortage of foreign currency and a variation in exchange rates, alongside rising competition and an increase in taxes, are having a negative impact on Sudan’s telecoms industry, according to a report by Reuters. ‘The availability of foreign currency is a big issue for telecoms companies because we depend on imported services and equipment,’ Zain Sudan chief executive Elfatih Erwa told the news agency. He added that Zain, a unit of Kuwaiti telecoms operator Zain Group, had sometimes delayed payments to foreign suppliers, although these were still delivering on schedule. Sudan lost around three-quarters of its oil output when the South seceded in July 2011, ending its main source of state revenue and foreign currency. Sudatel’s director for corporate sales, Mohamed Nasir, meanwhile said that deliveries of equipment can be delayed due to the ‘limitations in the use and transfer of US dollars’. The situation is compounded by a new tax on telecoms operators introduced by the government in December 2011 to make up for the loss of oil revenue from newly independent South Sudan. Sales and services taxes for telecoms firms were increased from 20% to 30%, while a tax on profits was hiked from 15% to 30%. Despite these factors, market leader Zain expects to sign up an additional one million mobile subscribers in 2012 to boost its total customer base to 14 million by year-end, although earnings gains will be offset by weaker operating margins due to the higher taxes and the worsening economic situation. Zain – alongside the market’s two other mobile operators, MTN Sudan and Sudatel – began dividing their operations into two units after the South gained independence last year, but have yet to agree a licence fee with the new country.

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