Econet profitability subdued

by Melody Chikono

LISTED telecommunications giant Econet Wireless Zimbabwe Limited’s profitability is set to remain under pressure in the second half of 2021 on the back of already accrued foreign exchange losses.

However, moving forward, the group’s performance is forecast to take a new trajectory with tariff adjustments implemented in July and August 2020 expected to narrow the loss position for the second half of 2021 ushering the group into a profit position in 2022.

Econet was plagued by a myriad of challenges in the period, particularly limited access to foreign currency, while highly exposed to foreign currency-denominated debt, disruptions in power supply and a hyperinflationary environment.

Local research company IH securities said the recently introduced sector-specific pricing index, the Telecommunications Pricing Index (TPI), is expected to improve viability in the sector.

“We expect this index to bring some measure of viability to the telecommunications sector. We anticipate stability in exchange rates to drastically reduce foreign currency exchange losses though some element of exchange rate risk remains,” IH said.

“Resultantly, we expect the group to gradually move from a loss position to a profit position and we anticipate FY21 to close at a loss position of $515 million while FY22 is expected to register a PAT (profit after tax) of $7,35 billion.”

The group continues to look for innovative solutions in the industry and has embarked on an initiative of transforming from being a communications service provider to providing digital services in an effort to embrace the Fourth Industrial Revolution.

IH foresees Econet continuing to lead in this new era and unlocking opportunities the revolution presents. The company is expected to reap the benefits that come with being a pioneer with such diversification.

In the first half of the 2021 financial year, the group’s top-line surged 712,71% in 1H21 to $6,80 billion up from $836,44 million (10,2 million) registered in the same period prior year.

Revenue growth was also affected by enforced price ceilings on tariffs by the regulating body, Postal Telecommunications Regulatory Authority of Zimbabwe (Potraz).

For the period under review, Econet edged up its market share in voice traffic by 2,6% points to 82,7% while subscribers increased a marginal 0,24% to 12,59 million.

Data consumption jumped 10,8% spurred by an increase in online activity due to the Covid-19 lockdown. The lockdown has resulted in companies requesting staff to work from home which has led to a substantial increase in the demand for data.

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