admin
Prosper Ndlovu, Business Editor
ZIMBABWE’s leading telecommunications company Econet Wireless recorded $36.1 million profit for the year ending February 2017 which is a 10 percent drop compared to the $40.2 million recorded the previous year.
The company attributed the decline in profits to reduced consumer spending, which also saw revenue for the period under review falling by three percent.
In a statement accompanying its financial results for the period, Econet blamed suppressed economic activity in the country for eroded earnings as well as reduced investment in its operations.
“Revenue for the year under review declined by three percent to $621.7 million,” chairman James Myers said, adding:
“The telecommunications industry has continued to experience a decline in revenues resulting from a deteriorating economic environment.”
Econet noted that voice revenues have been steadily going down as consumers shift to data application services, which now contribute about 32 percent of revenue from 14 percent in the first half of 2015.
Econet derives 60 percent of its business revenue from cellular network operations that largely comprise voice and data.
The firm also provides financial technology business that is anchored on banking services through Steward Bank, mobile money (EcoCash) and mobile insurance platforms like EcoSure.
Earnings before interest, tax, depreciation and amortisation (EBITDA) also declined by six percent to $224 million from $238.4 million.
In January this year Econet went into the market to raise $130 million from its shareholders to pay foreign loans in the face of crippling cash shortages that resulted in a delay in foreign currency payments. As a result Econet said its capital expenditure (capex) to revenue ratio declined to five percent.
“Generally, Capex to revenue ratios in our industry are above 10 percent and the inability to continue investing at the appropriate level may delay our ability to optimally deliver our services, consistently and reliably, unless we are able to obtain access to foreign currency, which is required to continuously capitalise the business,” said Myers.
The board chair said the company was still owed more than $26 million by its local interconnect partners as at February 28, 2017.
“The inability to obtain the payments also affects our investment decisions as this cash flow is necessary in order to meet the costs of providing the interconnect services on the network,” he said.
On the outlook Econet hoped the successful completion of the rights, and the subsequent payment of the foreign debt, would strongly position the company to deal with the challenges it is facing in the economy.
“Our robust business model, which is anchored on responding pro-actively to the changing economic and technological environment, remains an anchor on which we will continue to develop our strategies for the future,” said Myers.
He said the technical infrastructure of the company was crucial to its progress towards the future.
In view of the five percent excise duty on airtime, which was introduced by the Government in the 2017 budget, the board chair said for every dollar spent by the consumer, 28.8 cents was being collected and paid to the State and its statutory bodies in the form of Value Added Tax, excise duty, levies and licence fees.
“This is in addition to paying for a 20-year operating licence in 2013, at a cost of $137.5 million. Total payments to Government and statutory bodies since dollarisation, in 2009 exceed $1.3 billion,” said Myers.
The company, however, retained a strong asset base at $1.2 billion compared to $1.1 billion last year. Despite the drop in revenue Econet resolved to declare a dividend of 0.467 US cents per share amounting to $12.1 million.
Online Reporter
Bongani Ndlovu