Econet cashes on broadband and Ecocash


This resulted in a 26 percent reduction in finance costs to $26.7 million.

Debt to equity ratio was more favourable at 17.8 percent from 31.3 percent.

The low finance costs should also increase its net income in the half-year period.

Econet’s net profit of $36.19 million represented a 10 percent decline from $40.2 million recorded in the previous year.

However, capital expenditure was constrained during the year due to the unavailability of foreign currency to pay foreign suppliers, with $32.93 million spent on capital projects compared to $82.85 million in the prior year or the $148 million and $140 million in 2013 and 2014 respectively.

Econet’s cash generating ability remains strong, with cash flow from operations of $174 million achieved in the period from $199 million previously.

The company remains a firm favourite with investors after paying a dividend of 0.467 cents per share, a total of $12.1 million, which is 35 percent of its net income.

Since the release of the financials on May 31, Econet’s share price has risen by 11.5 percent to close at 34 cents yesterday.

The challenge posed by foreign currency shortages is an industry wide problem, and as such, it will not create a competitive edge for Econet’s rivals, Telecel and NetOne.

On November 4 last year, Zimbabwe introduced compulsory infrastructure sharing for the country’s mobile operators through Statutory Instrument 137 of 2016 although this has yet to take effect.

The law will not benefit Econet, which is currently owed $26 million in interconnect fees by  other operators, which analysts expect will be settled in treasury bills (TBs).

Econet has come up with a diversified operating model which consists of telecommunications (broadband, voice and SMS), media (content provision through Kwese) and technology (payment solutions and digital banking e.g. EcoCash and Steward Bank), e-commerce solutions such as Ownai, E-learning platforms like Ruzivo and Internet of Things solutions, including ConnectedCar.

Ecocash is likely to thrive through the current liquidity challenges, after adding more applications to its portfolio that include prepaid electricity tokens, school fees payments, bank-to-wallet transfers among others.

Overall, broadband and Ecocash remain key pillars in light of falling voice revenues and management has indicated that the group will continue to prioritise cost rationalisation to improve margins.

It expects to cut costs by a further 10  to 15 percent during the year.

Despite the headwinds besetting the country at large, analysts anticipate revenue to increase in the coming year-end on better revenue contribution by EcoCash and broadband.

An improvement in EBITDA margin is also likely on the back of cost containment measures.-The Source


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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.


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