Tough times for Econet as forex scarcity affects network expansion
tLIVINGSTONE MARUFU
Zimbabwe’s largest mobile telecommunications operator, Econet Wireless, has been hard hit by shortages of foreign currency, a situation which has seen the company failing to invest in network expansion projects.
The situation has been worsened by low revenues due to sub-optimal tariffs coupled with cost pressures experienced under the hyperinflationary environment.
Econet deputy CEO Roy Chimanikire told Business Times that the country needs to have a framework that enables infrastructure development.
“If you look at our latest accounts it shows that there were huge exchange rate losses as there are obligations that we were not able to settle and it’s because of that issue. It means you can’t invest,” Chimanikire told Business Times.
He added: “If you look at every statement over the past five years we stated that the company was not able to invest. It catches up as traffic will be increasing. Therefore, you need to build a bigger bus to accommodate more people. But, the bus remains the same.”
Econet subscribers increased by 20% to 16.1m in 2022 from 13.4m in 2021 and Chimanikire said the company needs to increase the “capacity to match increasing subscribers”.
In the six months to August this year, Econet recorded foreign exchange losses of ZWL$43.7bn representing 39% of revenue against a prior year comparative of 2% virtually eroding any possibility of achieving an accounting profit.
The foreign debt carried by the business represents the debt that was on the balance sheet at the time of the change of the currency in 2018 and the business continues to engage the monetary authorities for a settlement of this debt at 1:1 in light of a provision in existing government policy.
“You know what happens, we have the ZWL pricing, and the dynamics change as the auction rate changes and it takes a very long time without any activities.
“Despite not participating in any activity, the company will incur obligations because for you to do a data session it’s a foreign currency issue. When the price is low it doesn’t mean you are going to recover,” Chimanikire said.
The telecommunications sector players continue to engage the regulator for regular and adequate tariff reviews which track inflation and exchange rate trends to ensure the viability of the sector.
The tariffs, however, continue to be set below both inflation and exchange rate trends. The telecommunication traffic monitoring system became fully operational on May 1, 2022.
In a statement accompanying Econet’s financial results for the six months to August 31, 2022, board chairman, James Myers said forex scarcity continued to negatively impact the group’s various network expansion and routine maintenance plans.
“Our goal remains that of meeting and addressing our customers’ communication and connectivity needs using the latest technologies.
With the limited foreign currency resources at our disposal, we further invested in our radio access network to reduce congestion and improve call completion rates and quality,” Myers said.
In the reviewed period, Econet slipped into a ZWL$5.78bn loss from a profit position of ZWL$25.3bn, attributed to sub-optimal tariffs which were outpaced by inflation.
Revenue for the group declined 1% to ZWL$112.4bn from ZWL$114bn.
EBITDA decreased 17% to ZWL$52.2bn in the reviewed period from ZWL$62.6bn reported in the prior comparative period.
