‘Econet profit to fall 49pc in 2016’

Business Reporter
MARKET watchers believe Econet Wireless Zimbabwe’s revenues could drop 21,3 percent to US$587,3 million in the year ending February 28, 2016, while net profit is projected to slump 49 percent to US$35,4 million in the same period.
Companies in the mobile telecommunications business are experiencing pressure on their margins owing to reduced consumer spending and a 35 percent cut in regulated tariffs by the Postal and Telecommunications Regulatory Authority of Zimbabwe.
Stockbrokers Lynton Edwards contend that introduction of new valued-added services to counteract declining revenues from traditional revenue-generating sources such as voice and short messaging services will not have an impact in the short to medium-term.
“At best the continued diversification of revenue will help reduce the rate of revenue decline. We expect the current revenue decline to carry through the second half of FY 2016. We forecast a 21,29 percent decline in revenue to US$587,3 million in FY16,” say Lynton Edwards.
In the six months to August 30, 2015, Econet reported that profit dropped 47 percent to US$23,5 million from US$49,8 million a year ago.
Revenues fell 17,7 percent to US$323 million from US$393 million a year earlier.
While there was a 6,4 percent fall in mobile broadband revenue, overlay services contributed more than US$35,5 million from US$27,5 million in the comparable year-ago period, representing a 30 percent leap.
The contribution of overlay services to total revenues has climbed from seven percent last year to 11 percent in 2015.
At the beginning of the year, Potraz effected the 35 percent reduction in regulated tariffs in addition to a five percent excise duty on airtime sales introduced in October 2014.
“This is the first reporting period with the full impact of these fiscal measures since their introduction,” said Econet chair Dr James Meyers in a statement accompanying group financials last week.