Yesterday Econet Wireless published its disappointing half year results primarily attributable to inconsistent and limiting government policiesĀ and tightening liquidity. Revenues were down 6.7% compared to the same period last year to $301.5 million despite subscribers having increased 9% to 10 million. The bottom line was the most disappointing number, $15 million down 37% from the 2015 comparable and the net profit ratio (NPR) was a lousy 5% in 2016 compared to 7.4% in 2015. This is in stark contrast to other companies in the region with Airtel of Zambia having posted an NPR of 10% for year ended 31 December 2015 and Namibia’s MTC an NPR of 24%. The disappointing numbers reflect the state of affairs in our beloved but forsaken Zimbabwe.

Inconsistent & limiting government policies

Post and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) suspended all promotions following Econet’s successful 7X promotion and this was seen as possibly POTRAZ trying to protect their own…the government’s blue eyed boy in telecoms; NetOne (and soon to be, Telecel). POTRAZ has up to now not indicated when the conditions will be ideal to re-introduce promotions again.

The imminent introduction of bond notes has also seen companies adopt the wait and see attitude and coupled with the liquidity challenges; Econet’s capital expenditure (CAPEX) intensity dropped from 16.6% to 5.1%. The current liquidity situation has also meant international creditors’ payments are being delayed as the Reserve Bank of Zimbabwe (RBZ) prioritises national payments ahead of private business and individual payments.

Politicking

Up until last week, the door was shut on Econet who have since 2013 been trying to participate in the electricity prepaid tokens distribution network. Reason being; Econet is not part of the government’s blue eyes boys. The government’s blue eyed boys are noted by their quick responses to the ruling party’s begging bowl which always come around twice a year: annual conference, 21st movement and any other events of that nature. Whilst it is widely acceptable that Econet through its Ecocash platform is highly placed to be an efficient distribution channel given that it has more than 10 million subscribers, those involved in the process however, are aware of Econet’s Christian values and their policy to non-payment of bribes, thus it has been made difficult for Econet to be considered. How the breakthrough came about, we are yet to find out…but it is definitely a welcome positive move. I foresee better numbers in their second half coming from the 2-4% commissions on selling electricity tokens and the market expects Ecocash to be the biggest dealer in this space by the end of the year.

The positives: Ecocash, Financial services…

Econet Chairman James Myers in his report highlighted that Ecocash had attained 1 million subscribers on its Ecosure platform, a funeral assurance product relaunched in 2015. Dr Myers noted how Ecocash had become an instrumental payment platform after the cash shortages which started in May this year leading to an increase of 13.6% in Ecocash revenues in comparison. Financial services revenue contributed 34% of the group’s total revenue and the group will continue to focus on Over The Top (OTP) services to compliment the core business of data and voice services. The Econet group continues to be one of the biggest employers in Zimbabwe directly and indirectly employing more than 50,000 people and having contributed about $1.2 billion to the fiscus since 2009. You would think as Econet is one of the biggest contributors to the economy the government would aide it in their new projects by processing licences and proposals speedily, but you would be soooo wrong!