Analysts are calling on the Zimbabwean government to subject Starlink, the low earth orbit satellite internet service owned by billionaire Elon Musk’s SpaceX, to taxes that are comparable to those levied on local Internet Service Providers (ISPs) and telecommunication companies to ensure a level playing field in the internet broadband operating environment.
Starlink, which recently launched its services in Zimbabwe, offers high-speed internet access across the country – including in remote areas where local telecommunications companies have struggled to provide reliable coverage due to the high costs of investment relative to the return on investment in remote areas.
But while the coming of Starlink has been seen as a welcome development for improving connectivity and creating healthy competition, experts warn that without subjecting Starlink to the same taxes and regulatory fees that local telecommunication operators and Internet Service Providers are subjected to, it could hurt the industry and, in the long run, prejudice the nation.
Reliable industry sources – including financial statements and public statements made by the TOAZ (the Telecommunication Operators’ Association of Zimbabwe) say local telecommunications companies are subject to multiple taxes and levies that include a 1.5% Universal Services Fund (USF) contribution, a 10% special excise duties on airtime sales charged over and above the 15% VAT, spectrum fees per channel, annual numbering fees, and – most notably, a 15% withholding tax on imported broadband services.
These levies and taxes place a significant strain on the sector’s profitability and growth and play a key role in pricing, which consumers deem to be quite high.
In addition, mobile operators in particular pay significant licensing fees. Econet is known to have paid a US$137 million license feed (for a 20-year license), while internet service providers (ISPs) pay US$5.5 million.
But in contrast, Starlink's is known to have only paid a license fee of only US$575,000, causing analysts to raise concerns about a lack of parity.
“Zimbabwe's local telcos have been pivotal in connecting both urban and rural communities and, in the process, paying significant taxes and levies from their revenues, which contribute toward national infrastructure development,” said Macdonald Ndovi, an economist.
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“If Starlink is not subject to these same financial obligations, we risk creating a two-tier system where international players, like Starlink, thrive while local companies are weighed down by heavy tax burdens.”
Ndovi’s concerns reflect broader anxieties about the potential consequences of Starlink’s entry into the market on the operations of local businesses.
“If Starlink captures a significant market share due to lower operational costs, it could severely impact the revenue streams of existing ISPs and mobile operators, but – more importantly, hurt the government’s tax collection base,” said one analyst who declined to be named, due to his links to local mobile network operators.
Dr Munyaradzi Gwatidzo, CEO of Algebra Tech, underscored the same risk, pointing out that local companies are already facing challenges from high production costs and frequent electricity outages, which make it difficult to invest in infrastructure and innovation.
“Introducing a foreign player without subjecting them to the same financial obligations puts local companies at a severe disadvantage,” said Gwatidzo.
“If Starlink continues to grow without these constraints, we could see local ISPs losing revenue, leading to job losses and suffering reduced capacity for investment in network expansion.”
The threat comes at a time when local telecom companies are grappling with escalating operational costs.
Frequent power outages and a volatile local currency have made it increasingly difficult for them to expand their networks, upgrade services and innovate.
According to industry insiders, many of these companies are barely breaking even and depend heavily on subsidies from the government and other financial incentives to keep providing services, especially in rural areas.
Some have observed that beyond market dynamics, the lack of comparable taxation for international players such as Starlink could undermine Zimbabwe’s broader national development agenda.
Nyasha Moyo, an economist, stressed that taxation of all telecommunications operators, including international ones, is crucial for supporting projects that aim to bridge the digital divide.
“The Universal Service Fee, for instance, is used to fund initiatives that expand telecommunications access in underserved regions,” Moyo explained.
“If Starlink is exempted from these contributions, it would severely undermine efforts to provide widespread connectivity in rural and remote areas.”
Moyo also pointed out that local telecom operators contribute to the country’s health system through a 5% health levy, which funds public health initiatives, including the COVID-19 response during the pandemic. She warned that Starlink’s exemption from this levy was a missed opportunity for the government to tap into a wider revenue base to fund healthcare initiatives.
“Ensuring that Starlink pays this levy would not only promote fairness in the industry but also contribute to strengthening the country’s health infrastructure.”
Telecommunications consultant Tedious Chikafu said Starlink’s tax exemption could distort the market and drive local companies out of business. He argued that Starlink, due to its relatively lower cost structure, could offer services at prices that undercut local operators, creating an unfair competitive environment.
“If Starlink is exempt from these taxes, it will allow them to offer services at lower prices, driving local companies out of business. Over time, this could lead to a monopoly where consumers no longer have multiple providers to choose from, which would ultimately hurt the industry,” Chikafu said.
Others voiced the concern that as a foreign-owned company, profits generated by Starlink in Zimbabwe would be flowing out of the country, limiting local reinvestment in critical infrastructure projects.
In Kenya, Safaricom, the country's largest telecommunications company, has urged the government to exercise caution when granting independent licenses to satellite internet providers.
“Satellite coverage inherently spans multiple territorial borders, and this poses the risk of illegally providing services and causing harmful interference within the territorial boundaries of the Republic of Kenya,” the company stated in a letter to the Communications Authority.
Safaricom recommended that the regulator require satellite providers to operate as "infrastructure providers" in partnership with mobile network operators such as Safaricom.
According to the company, this approach would ensure that satellite providers invest in the country, create local employment opportunities, and comply with Kenyan laws. - Staff Reporter
