Zimbabwe: Econet Wireless Reports 42 Percent Fall in Annual Profit to U.S.$40 Million

Zimbabwe's largest telecommunication company, Econet Wireless, on Wednesday reported a 42 percent fall in annual profit to $40 million, citing a high depreciation charge and the effects of a government sanctioned tariff cut.

Government last year effected a 35 percent voice tariff reduction and imposed a five percent excise duty on airtime sales, a 25 percent duty on handsets, and a five cents levy per transaction on mobile money transfers.
As disposable income falls, Econet's 10 million subscribers are spending less on their phones, with average revenue per user (ARPU), falling from $8,14 per month in the previous year to $6,84. The company warned that falling consumer spending would put Zimbabwean businesses under increasing pressure.

Total revenue at $641 million was down 14 percent compared to $746 million achieved last year. Earnings before Income Tax and Deprecation (EBITDA) amounted to $238 million from $285 million in the previous year.

"This reduction in revenue was as a result of the regulatory price reductions and increased levies as well as the deterioration of the economic environment," said group chief executive Douglas Mboweni while presenting the company's financial results.

"We estimate that the adverse impact of the tariff on the full year revenues was about $95 million."

The number of subscribers grew to just over 10 million from 9,193 million previously but the average revenue per user at $6,84 per month was down from $8,14 per month.

Voice revenue dropped to 56 percent of total revenue, from 64 percent previously. Broadband revenue grew $10 million to $113 million, contributing 18 percent to total group revenue.

EcoCash, Econet's mobile money service, recorded a 19 percent increase in revenue to $87 million. The service handled $6,6 billion worth of transactions though the year, up from $5,5 billion the previous year.

"In EcoCash we believe we have a winning product that can perform well in this difficult environment."

In its outlook, Econet warned that the current cash shortages would burden businesses in Zimbabwe.

"The ongoing foreign currency shortages and general liquidity constraints have made it difficult for customers to spend on goods and services. The stagnation of the economy and the consequent impact on consumers will continue to put a strain on all businesses operating in Zimbabwe."

During the second half of the year the company spent $7,5 million on retrenchment costs.

Earnings per share (EPS) decreased to 2, 6 cents from 4, 5 cents the previous year.

The company declared a dividend of 0,9 cents per share, with $13 million in total to be paid out.

SOURCE:NEW ZIMBABWE