Econet, NetOne Results Poles Apart

WHILE mobile operator Econet Wireless presented an optimistic outlook of the operating environment in the first quarter of this year, its major rival NetOne told a different tale altogether.


Econet says the first two months of this year contributed close to 32% of the total revenue realised during the reporting season, despite early challenges of implementing a new US dollar distribution system for its products.

The mobile operator said beyond the two months, revenue continued to grow, but did not state the actual numbers, saying such information would be made available when the company releases its interim financial results in August.

Its major rival, NetOne, on the other hand told a different story during the same period.

NetOne said it was bearing the brunt of “economic hardship” and appeared sympathetic to its subscribers’ plight saying contract subscribers who accumulated bills during the first quarter of this year following the dollarisation of the economy had been granted “some kind of reprieve”.

But analysts say although NetOne did not issue distress calls, the company will be happy to salvage whatever it could after giving postpaid subscribers slight room to make calls following the dollarisation of the economy.

“NetOne understands that dollarisation has affected us all. Taking into consideration the economic hardships, NetOne is giving you a 30% discount on bills incurred between January and March 2009, provided you settle that bill not later than 31 August 2009,” the company said.

The company also put a cherry on top of the discount in the form of easier payment terms and credited customers, who have already honoured their bills saying such subscribers would be automatically credited with a 30% discount. Should NetOne subscribers fail to meet the network’s benevolent August deadline, it would be cheaper to cut off such subscribers, analysts say.

“No interest charges have been levied on the amount due but failure to pay the total amount due by 31 August 2009 shall attract an interest charge at the prevailing minimum lending rate applied by our bankers.”
At the same time, Econet said management took the decision in November last year to migrate postpaid customers to prepaid because the mobile operator could not invest in a new billing system and avoided exposure from defaulting customers.

Management said at the time the company needed to commit resources to key components.

 “However, after operators were allowed to bill in foreign currency, we were able to renegotiate terms with our suppliers. Subsequently, we were in a position to invite customers back to postpaid. There was no automatic and wholesale migration of customers that had previously been on contract back to postpaid. Econet used its prudent systems to reduce exposure to default,” Econet corporate communications manager Rangarirai Mberi said.

“We therefore did not have negative exposure during the changeover to US dollars. An important point to note is that while the changeover to prepaid had indeed caused great discomfort, it enabled our customers to have better control of their costs,” he said.

“For instance, corporate customers that had multiple lines on contract used the opportunity to trim the number of accounts on their books upon their return to contract, enabling them to have a firmer handle on their costs,” said Mberi.

The company, however, says the use of multiple currencies and the collapse of the Zimbabwe dollar had essentially made the accounting process for the first 10 months of the trading year an ‘academic exercise’. Econet added that what was important to the company was what had happened in the last two months when dollar tariffs were introduced.

The company also announced plans to lift the group’s capacity from 2,5 million subscribers to 5 million by the end of next year. Currently, Econet has a connected capacity of about 1,2 million and expects that number to exceed two million by the end of this year.

“Whilst this time last year Econet Wireless’ income came almost exclusively from investments, the income statement this year has almost no investment income,” the company said.

The revenue for the year was $87,9 million, and the earnings before interest, depreciation, tax, and armortisation was $26,6 million, or 30%  of revenue.

The company re-valued its assets in US dollars, showing the growth of its balance sheet to have increased to $176,4 million. However the revaluation in the assets resulted in a depreciation charge of $18,4 million, which contributed significantly to a net loss of $2,1 million for the year. Management was not duly concerned with this number, given the turmoil in the first 10 months of trading.

Econet Wireless controls 60% of the market share while NetOne and Telecel share the difference.

Chris Muronzi

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