Chairman’s Statement
INTRODUCTION
The evolutionary journey that the Company has embarked on will result in the transformation of our business from a communications services to digital services provider. The business was founded on a pioneering spirit and remains a leader in developing pioneering solutions. Over the last 22 years, the Company has introduced products and services that have transformed the lives of people in Zimbabwe. On the back of this solid history, we are intensifying our efforts to adapt our business model to respond to the changing needs of our customers. We see the next few years as being pivotal as we develop a business that embraces the fourth industrial revolution.
BUSINESS ENVIRONMENT
Statutory Instrument (SI) 85 of 2020, which was promulgated on 29 March 2020 allowed local businesses to receive and pay for local goods and services in foreign currency. Further to this development, on 23 June 2020 the Reserve Bank of Zimbabwe (“RBZ”) reintroduced the Foreign Exchange Auction System. Since the introduction of the Foreign Exchange Auction System, this has resulted in stability of exchange system. The business continues to pursue opportunities to receive payment of some of its services in foreign currency.
REGULATORY ENVIRONMENT
The Postal and Telecommunications Regulatory Authority of Zimbabwe (“POTRAZ”) introduced a sector specific pricing index, the Telecommunications Pricing Index (“TPI”). Tariff adjustments, in line with TPI, have brought a measure of viability to the telecommunications sector. The tariff adjustments, implemented in July and August 2020, are expected to have a significant impact on the results for the second half.
COVID-19
The sudden and unexpected onset of the Covid-19 pandemic earlier has changed the world in ways that we could never have conceived. The need to ensure that businesses have effective digital strategies and capabilities was evident as national lock-downs across the world disrupted our day-to-day lives. Our priority is the health and safety of our staff, customers and those we engage in conducting our business. We have shifted the way we work and operate our business to adapt to the physical distancing requirements that came into effect as part of national efforts to contain the spread of the virus. Our digital platforms were put to the test and proved, resoundingly, to be robust. In place of our physical contact centres we had to develop remote communication and sales channels for our customers. More than 90% of our staff are currently working remotely. We have accelerated our human resources capabilities and are transforming our policies to permanently support remote working opportunities.
OPERATIONS REVIEW
We maintained quality of service despite the numerous challenges facing businesses in Zimbabwe. In particular, limited foreign currency and disruptions in power supply continue to put significant strain on our ability to provide uninterrupted excellent service. Our mitigation strategies, which include moving to remote monitoring and operation of our network, as well as reducing our reliance on power from the grid through DPA – through which we expect at least additional 18 MW of power to be available by the end of the year – were critical to our success.
Our operations are driven by a complex architecture of digital platforms that are maintained by highly-skilled teams who have received extensive training in managing information technology platforms. We have developed a world-class data centre and effective monitoring tools that allow us to review all operations from our National Operations Centre (“NOC”).
Our Enterprise Business, founded on the need to help businesses digitalise their operations, was involved in developing a suite of digital offerings for the local market to suit both large and small businesses. The range of activities undertaken varied from helping businesses automate their processing plants to asset tracking and monitoring solutions as well as machine to machine communication using internet of things (“IoT”) technology. The possibilities of what we can achieve as we tackle business problems and create relevant solutions, using technology, presents a vast area of opportunity.
As our customers service center deployed digital interfaces to deal with the social disruptions caused by the Covid-19 pandemic, we witnessed an increase in all data traffic by about 100%. Specifically, LTE/4G traffic increased by about 150%. In response to the pandemic, we launched segment specific offers targeted at individuals, businesses, churches and educational institutions and other key institutions. The capacity increase was possible because of our forward looking investment strategy that allowed us to build capacity ahead of time, even with very limited resources. Our teams were able to manage the traffic demand, by analysing customer usage trends and profiles as we sought to understand the needs of our customers. The ability to analyse and interpret large data sets and develop intuitive customer solutions is a skill that we are fast developing in the business.
During the period under review the contribution from our data services to total revenue increased by 3 percentage points, from 25% to 28%. Our voice and SMS segments of the business remain robust and have largely retained their share of traffic in the market. As we transform the business to be focused on digital services, we remain committed to innovative approaches to provide these services and ensure that our customers get the best quality voice and SMS services.
During the period under review over 24 million interactions were handled through our robust self-care platforms, a 50% growth from the previous period. A notable innovation, was the automation of SIM swaps which was successfully launched in July 2020. This initiative resulted in a 67% reduction in contact time for SIM placements with our customers. The deployment of the Dynamic Sim Allocation saw a re-direction and re-distribution of 65% of the traffic resulting from Sim replacements from our shops to over 1 000 channels comprising Brand Ambassadors and Green Kiosks, who now provide this service. The strategy of driving digital adoption to enhance customer convenience resulted in the growth of our digital customer management platforms (Facebook, Twitter, Web Chat and WhatsApp) which are currently handling 75% of total customer interactions.
The business continuously evaluates its pricing models in line with changes in the operating environment to ensure its services remain affordable. Through targeted segment specific offers and bundles, the business has been able to sustain customer volumes on its various platforms. In this way, the business has been able to maintain its share of traffic and revenue in an environment where customer disposable incomes have been declining.
FINANCIAL REVIEW
The Directors’ commentary is based on the primary financial results, being the inflation adjusted consolidated financial results, having adopted IAS 29 – Financial Reporting in Hyperinflationary Economies. The business continues to generate adequate cash flows on the back of an EBITDA margin of 47%, made possible by strict cost management policies adopted by the business. Revenue closed the period at ZWL$ 10.1 billion, compared to ZWL$ 10.8 billion in the same period last year.
Our engagements with our partners helped us build positive relationships with our key partners which have allowed us to agree sustainable payments plans for our foreign currency commitments. Continuing to meet our obligations to our key partners is a priority as we develop and upgrade our infrastructure. Exchange losses continue to weigh-down on business performance, although, when viewed as multi-year commitment, the business is able to meet its outstanding obligations, over time, if the tariffs are maintained at viable levels, which is currently the case.
The net foreign currency position of the Group remains positive as a result of the equity holding of the Company in Liquid Telecommunications Holdings Limited, valued at US$ 135 million.
TREASURY SHARES
In line with the authority granted at the last Annual General Meeting, the Company bought back and is cumulatively holding 107 609 339 treasury shares.
SUSTAINABILITY
The principles underpinning ethical and sustainable business practices remain a priority for our stakeholders. The business realises its responsibility to drive positive change by its commitment to sustainable and responsible environmental, social and governance practices to proactively address sustainability challenges. The principles of ethical and sustainable business – which are also a priority for our stakeholders – guide our approach to customer and employee relationships, products and services, partnership operations, innovations and investments.
A highlight this year, is the leading role the business took to support government efforts to manage the damaging effects of Covid-19. In partnership with the Ministry of Health and Child Welfare; Higherlife Foundation and Cassava Smartech Zimbabwe Limited, the Company was involved in helping various national institutions respond to the pandemic. The Company was also involved in various fund raising initiatives and donation of personal protective equipment to front line health workers.The Company and its partners and affiliates continued in their efforts to support resettlement of victims affected by Cyclone Idai.
OUTLOOK
Founded in 1998, at the onset of the first period of hyperinflation, the business has continued to grow, despite the difficult operating environment. The Company’s strategy has adapted to the changes in the operating environment over the last 20 years. Our ability to transform the business and swiftly adopt new technologies has been demonstrated as communications technology evolved from GPRS (2G), 3G, 4G (LTE) and now 5G. Based on this strong foundation, the Company continues to explore new opportunities presented by the local conditions as well as global technological trends. We are now making bold steps to pivot our strategy from a communications service provider to a digital services provider.
APPRECIATION
The operating conditions have remained challenging. Yet, through the challenges, our customers have stayed with us, adapting to the new ways that they need to interact with us. We will continue to work to earn their business and trust through quality products and service that meet their needs and expectations. We also appreciate the support we receive from all our partners and stakeholders. We also want to thank our people, their creativity, resilience and commitment to the business continue to drive our growth and performance. As we continue to transform our business in line with changing context and needs, we acknowledge that transformation of this scale is never easy. On behalf of the Board, I express my most sincere gratitude to you all and look forward to the future with even greater hope and anticipation.
Dr. J. Myers
Chairman on the Board
26 November 2020
DEBENTURES
The Company intends to offer, on a voluntary basis, an early redemption of the capital and accrued interest on debentures issued in March 2017, at the time of the Rights Offer (“The voluntary redemption offer”). The voluntary redemption offer will be made in Zimbabwe Dollars, at the prevailing auction rate, paid to the nominated local Zimbabwe Dollar bank account of the respective debenture holders. Redemption will be on a voluntary basis. Debenture holders are free to hold the instrument to maturity, should they wish to do so, on the original terms and conditions.
The debentures will be redeemed in tranches, which tranches will be determined based on the availability of cash flow of the Company at the time of the announcement. Debenture holders will be requested, at the time of redemption, to state how many debentures they would wish to redeem. The cash available will then be allocated pro-rata to those that accept the offer for early redemption. The results of the early redemption offer and subsequent take up by debenture holders will be published after each redemption. The debenture register will remain available for inspection at all times, within the prescribed rules under the Debenture Trust deed.
The Extraordinary General Meeting of the Company, which was called for the purposes of considering the conversion of the debentures, which was postponed sine die, is therefore closed. Once the redemption process is initiated, the Directors do not envisage a situation whereby a conversation of the debentures to equity will be considered. In the event that at the date of maturity, the Company is unable to redeem the remaining debentures, for whatever reason, appropriate consultations will be done to ascertain the best possible way to address the issue.
This proposal is subject to Reserve Bank of Zimbabwe and other relevant regulatory approvals.
Related download
Econet Wireless Zimbabwe HY2021 financial results.pdf
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Directors: Dr. J. Myers (Chairman)*, Mr. S.T. Masiyiwa, Mr. R. Chimanikire, Dr. J. Chimhanzi*, Mr. M. Edge*, Mr. M. Gasela*, Mr. G. Gomwe*, Dr. D. Mboweni, Ms. B. Mtetwa*, Ms T. Moyo*, Mr. H. Pemhiwa*. *Non Executive |
