Tawanda Karombo Victoria Falls
THE days of robust growth from Zimbabwe’s biggest telecoms company, Econet Wireless, appear to be over, according to analysts. This follows a 41 percent fall in Econet’s after-tax profit for the year to February. However, some analysts maintain that the company’s diversification strategy into value-added services will provide some form of cover.
Econet Wireless said it had 9.1 million subscribers by the end of February, but reported that revenue for the period had almost stagnated at $746.2 million (R8.86 billion) compared with $752.7m in the previous comparable period.
The reduction in revenue has been attributed to a 35 percent tariff reduction implemented by the government on all mobile companies in the country.
After-tax profits had been suppressed by as much as 41 percent at $70.2m for the period, with officials also saying that levies on airtime top-ups and cellphone imports had contributed to the profit decline. Zimbabwe has two other mobile operators, state-run NetOne and Telecel Zimbabwe, which is battling licensing and regulatory issues.
Analysts at Lynton Edwards said on Friday that Econet Wireless was unlikely to rake in robust profit increases in the coming year.
Other experts said the company would probably struggle to maintain revenues at this year’s levels, especially as competition from cheaper communication alternatives increased.
Kudzanai Sharara, an analyst at brokerage firm, Lynton Edwards, said: “We estimate Econet to record flat to modest growth in both the top-line and bottom line.”
He said diversification would be crucial for the company as average revenue per user for the voice category – the industry’s traditional cash cow – continued to decline.
“The group is already experiencing a shift in business with non-voice services now contributing 22 percent of total revenue, up from 14 percent. Econet is now focusing on overlay services such as EcoCash and value-added services like broadband to further diversify revenue streams and cushion against declining (voice revenues),” Sharara added.
Econet executives said network investment during the period was 55.4 percent stronger at $125.5m compared with the previous year. This had pushed up earnings before interest, taxes, depreciation and amortisation by 14 percent to $285.6m.
However, owing to growing government demands for the telecoms industry to contribute more to state coffers in the form of levies and taxes, Econet had had “to cut capital expenditure, and stop further employment”, citing a difficult economic environment.
“The telecoms industry by its very nature is constantly experiencing dramatic technological changes that transform the way customers demand and consume the services of telecoms operators,” Econet Wireless chairman James Myers said on Thursday.
He said the company would also seek to enhance its revenue generating capacity and place more attention on cost optimisation, although it wanted the government to create a conducive policy environment.
“While revenue enhancement will remain a key priority, the business has intensified its cost optimisation efforts in order to retain value in the local telecoms industry, supportive policies will be required to allow local companies to grow their capacity.”