Chairman’s statement
“ Having launched the first 5G network in the country, in the first half of the year, expanding the breadth and depth of our 5G footprint will be pivotal in delivering additional digital growth services to both our retail consumers and enterprise customers. “
Overview
We remain committed to the fulfilment of our vision of ensuring a digitally connected future that leaves no Zimbabwean behind, despite the macroeconomic challenges that characterize the operating environment. Our focus on customer experience and delivering value enabled the business to maintain strong key operating metrics during the first half of the current fiscal year. Even with these strong operating metrics, these half year results reflect the impact of fiscal challenges that are beyond the business’ control.
Environment and regulatory review
Zimbabwe’s 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 (TTMS) system became fully operational on 1 May 2022. This has placed an additional tax burden of US 6 cents per minute on the business on international incoming traffic, thereby increasing the cost of delivering our services. It is anticipated that these increased taxes will result in customers opting to use alternative calling platforms that do not have similar obligations, such as WhatsApp, Telegram and other similar applications. As previously stated, these taxes are additional revenue taxes to those already paid by the Company prior to any allocation of revenue to cost of operations, and unwittingly create unequal regulation and disadvantages licensed operators.
Foreign currency scarcity continued to negatively impact the Group’s various network expansion and routine maintenance plans.
Operations review
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. Having launched the first 5G network in the country, in the first half of the year, expanding the breadth and depth of our 5G footprint will be pivotal in delivering additional digital growth services to both our retail consumers and enterprise customers.
As part of our digital service provider (DSP) thrust, the business migrated and upgraded the call centre platform to a more reliable and scalable cloud platform. The new system handles more customers efficiently, thereby reducing customer waiting and query handling times. This resulted in an improvement in our query resolution time and customer experience. The business experienced an increase in the uptake of self-care platforms. The self-care platforms include subscriber registration verification self-service, PUK retrieval, international roaming activation and airtime transfer among other services.
We also launched the electronic recharging system (ERS) for our mobile channel partners and have signed up more than 200 channel partners as we seek to serve even the most remote areas of the country. Our focus on customer empowerment saw an increase in self-service adoption on both the traditional USSD and our more recent web platforms.
Financial review
Inflation adjusted revenue for the period under review was ZW$112.4 billion, representing a decline of 1% compared to the same period last year. Whilst voice and data volumes increased by 27% and 40%, respectively, these increases were negated by tariffs which remained unaligned to the cost base of the business. The subdued revenue performance is indicative of frequent tariff reviews that are lagging behind inflation and changes in the consumer price index (CPI). For the period under review, year-on-year inflation was 285% and the tariff increase of 61% was not adequate to cover the loss in value.
The table below helps to illustrate the misalignment of tariff adjustments to changes in macro indicators:
Earnings before interest, taxation, depreciation and amortization was 17% lower than the same period last year. The reduction in our profit margin was partly attributable to low revenues due to sub-optimal tariffs coupled with cost pressures experienced under the hyperinflationary environment. As a result of the exchange rate movements over the last six months, the business recorded foreign exchange losses of ZW$ 43.7 billion 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.
The business 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% of revenue compared to a regional average of 15% 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.
Corporate social investment
Despite the challenges faced, the Group continues to invest in the communities in which it does business. During the period under review, our team’s accelerated community outreach activities through initiatives under three strategic pillars: Education, Global Health, and Rural Transformation and Sustainable Livelihoods.
Our efforts through our implementing partner, Higherlife Foundation, positively contributed towards human capital development through its flagship scholarship programs, where more than 8 500 learners were supported with scholarships. 36 000 students were awarded technological scholarships to access the Akello platform in a bid to catalyse access to quality education.
Under the Rural Transformation and Sustainable Livelihoods theme, we focused on continuous technical advisory services and harvesting for rural farmers that had been trained and supported with farming inputs at the start of the farming season.
Our initiatives under the Health pillar continued to complement the activities of the Ministry of Health and Childcare. Our activities chiefly focused on improving health outcomes in maternal and neonatal health in referral hospitals; preventing the further transmission of neglected tropical diseases by 2025; elimination of cholera by 2028; and catalysing Zimbabwe’s ability to prepare and respond to public health threats, emergencies, and disasters.
Outlook
The Group continues to seek value creating opportunities. We have a strong platform to anchor our transition to a fully-fledged digital services provider. Going forward, exploiting 5G network enabled opportunities will be key to keep abreast with global trends and improve service delivery. To enable all of this, we continue to seek opportunities to access foreign currency for which all our initiatives are dependent.
Dividend declaration
The Directors have decided not to declare a dividend for the period under review as they continue to assess the economic environment.
Appreciation
On behalf of the Board, I would like to extend my gratitude to our valued customers, business partners and stakeholders who continue to support our business during these challenging times. Our staff have made exceptional contributions towards the growth and success of the business, their passion and commitment to the business is appreciated. The continued unity of purpose and wise counsel from the Board members remains invaluable and is sincerely appreciated. On behalf of the Board, I would like to recognize the significant contributions made by our professional and competent management team. Without their personal commitments, we would be unable to achieve the value we create for all our stakeholders.
I am grateful to Ministry of ICT, Ministry of Finance, the Reserve Bank of Zimbabwe and our regulator, POTRAZ, for the opportunity to engage on industry specific issues of regulation, policy formulation and implementation.
Dr. J. Myers
CHAIRMAN OF THE BOARD
21 October 2022
Econet Wireless Zimbabwe Limited Reviewed abridged financial results for the HYE 31 August 2022
