Econet records $5 billion loss

Econet Wireless Zimbabwe slumped into a $5 billion loss for the half year to August 31, 2022 compared to a profit of $25 billion during the same period last year on foreign exchange losses and high cost pressures.

During the period under review, the business incurred foreign exchange losses of $43,7 billion representing 39 percent of revenue against a prior year comparative of 2 percent which eroded profitability.

In an update for the half year period, chairman, Dr James Myers added: “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.”

Earnings before interest, taxation, depreciation and amortisation (EBITDA) was 17 percent lower than the same period last year partly attributable to low revenues due to sub-optimal tariffs coupled with cost pressures experienced under the hyperinflationary environment.

Revenue for the period went down 1 percent to $112,4 billion compared to the same period last year although subscribers jumped 20 percent to 16 million.

Whilst voice and data volumes increased by 27 percent and 40 percent, respectively, the increases were negated by tariffs which, according to Dr Myers remained unaligned to the cost base of the business.

“The subdued revenue performance is indicative of frequent tariff reviews that are lagging behind inflation and changes in the consumer price index (CPI). For the period under review, year-on-year inflation was 285 percent and the tariff increase of 61 percent was not adequate to cover the loss in value,” he said.

During the period under review, the business also continued to pursue cost containment measures in order to maintain viability and conserve cash to avoid disruption of operations.

Capital expenditure for the six months was less than 5 percent of revenue compared to a regional average of 15 percent for other telecommunication operators.

“Accessing foreign currency remained a challenge due to acute shortages of foreign currency in the country. Lack of adequate capital investment adversely impacted our network coverage and, in turn, customer satisfaction,” said Dr Myers.-ebusinessweekly