ECONET Wireless Zimbabwe Limited directors were this week hauled over the coals by minority shareholders over the board’s continued deferment of dividend payments despite a sound financial performance.
Minority shareholders this week quizzed both executive and non-executive directors of the largest mobile phone operator in the country at an annual general meeting (AGM) in the capital over their decision to defer payment of dividends while at the same time pursuing a share buyback.
Econet in February this year announced a 10-for-one share split to ensure the stock became more affordable to the majority of the investing public.
CEO Douglas Mboweni, non-executive director Tracey Mpofu and deputy finance director Roy Chimanikire –– took turns to respond to the questions and maintain calm at the AGM through well calculated responses.
Mpofu was the first one to justify the prolonged non-payment of dividends, saying the company had other pressing financial obligations, including clearing a US$330 million debt for network expansion.
“We still need to service the debt. We still need to also continue with expansion but going forward we will be reviewing and see how best we can accommodate the investor,” she said.
She said the company had used much of its cash resources to the tune of US$137 million to pay for renewal of its operating licence for another 20 years.
“With the licence now behind us and the repayments of the bank obligations well underway, a dividend should be quite close but I am not in a position to say we will be paying at a specific time.
“What I can assure you is that the directors are very sensitive to this issue and certainly we will be looking at it and try to declare a dividend going forward,” Mpofu added.
She said the licence fee had been initially pegged at US$200 million.
However, it was negotiated downwards to US$137 million.
Mpofu said Econet had benefitted from negotiations with government on the licence renewal in that the company was given an additional five years on the tenure of the licence to 20 years.
“We also managed to get a reduction in continual licence fees. Previously we were paying 5% on annual licence fees and we managed to get it reduced to 2,5% and that benefit is very significant over a long period of time,” Mpofu said.
Chimanikire said the company was supported by shareholders to go for the share buyback.
“We have spoken to a lot of shareholders, including minority shareholders, who support the share buyback because they believe it gives value to them in the long term,” Chimanikire said.
The shareholders also demanded a trading update which Mboweni evaded citing Zimbabwe Stock Exchange technical rules, saying his company was in a closed period.
When pushed to give a general guideline on performance, Mboweni only said the company had exciting figures for its half year report.