Business: ECONET in $5.8billion Loss
Myers says tariffs lag behind inflation
TELECOMMUNICATIONS giant, Econet Wireless Zimbabwe posted a $5,78 billion loss in the first half to August 31, 2022 as tariffs continue to lag behind costs.
Econet has been urging the regulator to raise tariffs in line with inflation considering that inflation worsened for the period under review from the comparative 2021 period.
In its half-year ended August 31, 2021, Econet posted a profit after tax of $25,36 billion. The telco recently raised its tariffs to $41,77 per minute for voice calls, up from $25,95, while data charges went up to $6,6 per megabyte (MB), up from $4,1 per MB. Sending SMSes now costs $8,59 per message, up from $5,33.“Inflation adjusted revenue for the period under review was $112,4 billion, representing a decline of 1% compared to the same period last year. While 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.”
Chairperson James Myers said, in a statement attached to the firm’s half-year report ended August 31, 2022 released last Friday.
“The subdued revenue performance is indicative of frequent tariff reviews that are lagging behind inflation and changes in the consumer price index. 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.”
He said Zimbabwe’s telecommunications sector players continued to engage the regulator for 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 inflationary environment, apart from knocking Econet’s revenue and profits, affected the firm’s liquidity owing to poorer macroeconomic and market conditions, namely, fiscal and monetary systems, as well as the general regulatory framework.
As of August, Econet had $1,06 to every dollar of debt at the end of the period under review. Total assets recorded at the end of August were $377,43 billion, from a 2021 comparative of $288,91 billion, due mostly to a revaluation of its assets.
“As a result of the exchange rate movements over the last six months, the business recorded foreign exchange losses of $43,7 billion representing 39% of revenue against a prior year comparative of 2% virtually eroding any possibility of achieving an accounting profit.”
While the firm cannot raise its tariffs in line with inflation, costs and expenses rose to nearly $60 billion during the period under review, up 17,13% from a 2021 comparative of $51,22 billion.
Myers said the telecommunication traffic monitoring system system became fully operational on May 1, 2022 which placed an additional tax burden of US6 cents per minute on the business on international incoming traffic, thereby increasing service costs.
“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 to licensed operators. Foreign currency scarcity continued to negatively impact the group’s various network expansion and routine maintenance plans.”
He said Econet would continue to seek opportunities to access foreign currency for which “all our initiatives are dependent”.
