Zimbabwe’s largest mobile network operator, Econet Wireless Zimbabwe Limited, has reached out to the Reserve Bank of Zimbabwe (RBZ) over the settlement of legacy debts after the company suffered exchange losses of ZWL$6.1bn in the 12 months to February 29 2020.
Early this year, RBZ assumed the legacy debts, which has threatened the viability of companies, at the rate of 1:1 as part of efforts to help companies to sustain operations.
The debt burden has spooked companies which are now finding it difficult to borrow from offshore creditors and financiers.
The RBZ completed vetting of submissions made by companies in August this year, resulting in the central bank committed to settle US$1.2bn in legacy debts obligations on behalf of companies.
Econet board chairman, James Myers, said the central bank should move with speed to clear legacy debts to help companies operations.
“The group’s exposure in foreign currency denominated obligations resulted in exchange losses of ZW$ 6.1bn.
The group continued to engage the central bank on the settlement of legacy debts at the prescribed rate of ZW$1 to US$1 in line with the blocked funds framework announced by the central bank,” Myers said in a statement accompanying Econet’s full-year financial results to February 29 2020, which were published this week.
Revenue for the group increased 31% in inflation-adjusted terms, to ZW$ 6.8bn from ZWL$5.2bn in the prior comparable period.
Econet posted a loss of ZWL$1.352bn in the year ended February 29, 2020 from an after tax profit of ZWL$680.862m recorded during the same period last year.
Econet’s earnings before interest, taxation, depreciation and amortisation (EBITDA), however, decreased 4% to ZWL$2.7bn during the reviewed period.
EBITDA margin was maintained at 39% .The company focused on operational efficiencies which resulted in margin being maintained despite the pressures resulting from general price increases in the economy as well as the increase in network operational costs.
Econet said the smart phone penetration stood at 52%, compared to about 90% for South Africa, something which remains a challenge for the adoption of digital services.
Zimbabwe’s internet penetration rate remains low as approximately 22% of the devices on our network trying to access data services are “feature” phones with low data handling capacity.
“We are working closely with the government to review the duty regime for mobile devices to enhance the rapid adoption of digital services across the economy,” Myers said.
According to the latest Postal and Telecommunications Regulatory Authority of Zimbabwe report, for the second quarter of 2020, active internet and data subscriptions declined 2.4% to 56.7% from 59.1% recorded in the previous quarter.”
The world mobile operators’ representative, GSMA, said governments and policymakers should implement policies to enhance access to connectivity and drive investment in more resilient digital infrastructure for the future.
This is crucial to reactivating the region’s economy. Econet is optimistic that the government, which also acknowledges the benefits of a digitised economy, will ensure that Zimbabweans are not left behind.
Globally, companies and individuals are demanding access to products and services using digital channels.
Zimbabwe’s high level of literacy means that it is a fast adopter of new technologies. Econet said its business model is highly adaptable to the challenging operating conditions and also responsive to the changing needs of customer base.
Econet services approximately 60% of all the mobile customers and provides approximately 70% of all the mobile data capacity that is used in the country.
Econet board chairman said the increasing digitalisation of the economy necessitates an increase in 4G/ LTE infrastructure.
Myers said increased access to data services is necessary to support, among other critical imperatives, online education, health and business digitalisation initiatives.
Econet has a 3G population coverage of about 70% for data services across the country, and, inclusive of 4G coverage, the company now has 90% of the population covered by data-capable base stations, although based on the internet penetration rate, only 59% of the population have access to internet services.
4G/LTE is a technology that provides upload and download speeds that are up to 10 times faster than 3G. “As we increase our 4G coverage, complemented by the increase in data capable devices, we are able to provide faster upload and download speeds so that our customers can enjoy high speed applications.
The legacy debts burden has haunted a number of local firms which are finding it difficult to borrow from offshore creditors and financiers.
Most lenders across the world have now become risk-averse when dealing with Zimbabwe companies.
Last month, consumer staples concern MedTech Holdings said foreign companies have cut supplies of raw materials as the struggles to service legacy debts amounting to R27.9m continue.