Stung by a drop in after tax-profit in its half-year results to August 2016 and a decline in voice call and SMS revenue, Econet Wireless Zimbabwe is now staking its prospects on increased usage of broadband.
By Fidelity Mhlanga
The results show Econet suffered a decrease in revenue to US$301,5 million, a 6,7 million drop from US$323 million last year.
Consequently, Econet’s profit after tax dipped 37,14% to US$14,9 million from US$23,8 million in the same period last year.
“Broadband has become a very significant area for the business. But our objective at all times has been around the customer so we constantly watch what the customers’ needs are and we re-arrange ourselves so that those needs are satisfied,” Econet CE Douglas Mboweni said on Wednesday on the sidelines of the launch of a smart data network campaign.
Economist Prosper Chitambara said the reason why voice call and SMS revenue was down was largely because subscribers are now using data to both send messages and make calls via WhatsApp.
“Most consumers are now using WhatsApp to make calls and send messages at the same time and this eats into their revenue. As the economy is weakening, more people are failing to get disposable income,”
Chitambara added that this may have implications for the company’s tax contribution to the fiscus.
According to securities firm Inter-Horizon, the group’s strategy to focus on broadband and Ecocash has been bearing fruit, after these segments saw double digit growth during the half-year ended August 2016. Data revenue grew to US$58 million and Ecocash revenue was US$39,2 million.
Econet has introduced several platforms such as Ruzivo, EcoSchool, Ownai, Connected Car which are built on data usage.
“Going into the future it is an area that we are going to strengthen to make sure that our partnerships with our providers of services or device is becoming stronger. However, to bridge that gap between those two you need applications. Applications are critical in the sense that they begin to then drive usage,” Mboweni added.
Econet used US$15,4 million during the period under review on capital expenditure compared to US$45,7 million last year as the prevailing liquidity challenges buffeting the economy have made it increasingly problematic for it to continue to make investments in capacity expansion.
Earnings before interest, tax, depreciation and amortisation, (EBITDA) remained subdued, weakening 13,6% to US$105,9 million while the EBITDA margin softened to 35,1%.
Econet did not declare a dividend, opting to delay consideration to the end of the year.