Econet to raise US$30.3m from shareholders

BUSINESS REPORTER

Zimbabwe’s largest mobile telecommunications network operator, Econet Wireless Zimbabwe Limited, is planning to raise additional US$30.3m from shareholders as outstanding debentures are due for redemption this month, Business Times can report.

The debentures were issued in March 2017 as part of the US$128m capital raise to pay external creditors. The debentures are a medium- to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest.

In a cautionary statement to shareholders dated April 5, 2023, Econet Wireless company secretary, Charles Banda, said the company was considering calling for an extraordinary general meeting to get the nod from shareholders to follow their rights to buy more shares of the company to raise the required US$30.3m to redeem the outstanding debentures in the company.

“… shareholders and the investing public are advised to exercise caution when trading in the company’s securities until such time as the full details of the proposed rights issue are published,” Banda said.

The raising of funds from existing shareholders comes after the bulk of debenture holders spurned an offer by the company for an early redemption.

In 2021, Econet offered early redemption in which they the debentures were redeemed at a face value of US$0.04665 each plus interest calculated at a coupon rate of 5% per annum and compounded annually from the date of issue up to the date of payment to be converted to Zimbabwe dollar at the prevailing interbank rate as at the date of payment.

Econet said 22% of the debentures were held by locals and the balance by foreign holders and if the company waits for the maturity date, debenture holders may at that time be prejudiced as they will all have to queue up for the scarce foreign currency at the same time.

However, 255 debenture holders with 260,722,325 (22.34%) debentures opted for early redemption. Three out of four of debenture holders did not opt for early redemption.

In its trading update for the quarter to November 30, 2022, Econet Wireless reported a 9% revenue growth in the nine months to November 30, 2022, compared to the same period in 2021.

Banda attributed the growth to voice and data volumes.

He, however, bemoaned low tariffs.

“Inflation-adjusted revenue for the nine-month period grew by 9% compared to the same period last year. The growth was largely driven by voice and data volumes, which were however weighed down by tariffs which were below inflation,” Banda said.

He highlighted that the company was seeing growth in the proportion of United States dollar-denominated sales to local customers.

Banda also said Econet was hit hardest by a severe foreign currency shortage.

“Although the business continued to witness an increase in demand for its services, foreign currency availability for servicing our foreign suppliers has continued to be a major challenge and has hampered our ability to implement much needed network maintenance and expansion.

“Overall, the local telecommunications industry has been struggling to meet the capacity and coverage demands of consumers as investment is long overdue. Capacity enhancements and routine maintenance has remained severely constrained by the lack of access to foreign currency to service our foreign network suppliers. Management continues to engage and negotiate payment terms with our network equipment vendors to secure their continued support,” Banda said.