Econet Wireless Zimbabwe Limited (ECO.zw) 2021 Annual Report
While this report gives an account of our performance during a period riddled with the COVID-19 pandemic, a diverse and political environment and systemic inequality, our ESG Report highlights our commitment to our employees, the environment, and the communities in which we operate and serve, and the positive impact this commitment has on our business. We are humbled to have been able to play a significant part in the national response to the COVID-19 pandemic. We continue to record progress in our journey to increase the use of renewable energy.
Our business has continued to perform well in an extremely challenging environment. We continue to have an eye on the future – as the world becomes increasingly digital, our business is evolving. We are transforming from being a pure communication services provider to a digital services provider. Our vision is to create a new digital future that leaves no Zimbabwean behind. We will do this by providing a seamless digital experience to all our customers. By extending our network to cover areas that are not served, we will assist in bridging the digital divide. Our strategy is anchored on our well-developed digital platforms and highly adaptable skills base in mobile and digital technology.
ENVIRONMENT AND REGULATORY REVIEW
The Telecommunications Traffic Monitoring and Revenue Assurance Regulations were promulgated under SI95/2021 in April 2021. The regulations mandate POTRAZ to establish “a non-intrusive electronic system that would enable the authority to independently monitor and account for national and international telecommunications traffic and revenues therefrom, combat network fraud, enforce billing integrity and enhance revenue assurance for regulatory and tax purposes”. Econet has already installed its own traffic monitoring diagnostic tools to avoid revenue leakages and traffic fraud. We are still in consultations with the Regulator on the implementation of SI95/2021.
Whilst the World Bank Digital Economy for Zimbabwe Diagnostic report launched in June 2021 categorises Zimbabwe as being “advanced” in its infrastructure and connectivity service delivery due to the pioneering efforts of the Group and its affiliate companies, we recognise that there is scope for further improvements. We welcome the priority given to developing the digital economy as part of the National Development Strategy 1 (NDS1) and we believe we already have and can continue to make a significant contribution to the national efforts. The rural population remains under-served in the new digital economy and we are always investigating lower cost relevant solutions to address this segment in line with Government’s developmental agenda.
Foreign currency availability continues to be the biggest hurdle facing the Company. This has constrained our ability to provide adequate capacity to our customers. The Company has encounted operational challenges to meet its capacity enhancement and routine maintenance requirements.
We remain hopeful that the improvements in foreign currency availability due to interventions by the Fiscal and Monetary authorities will improve this situation in the forseeable future.
Our headline tariffs were last reviewed in August 2020. Given the inflationary pressures experienced, we believe that another tarriff review is due in order for the sector to remain viable. All our pricing is determined by the regulator using given cost inputs. The timely adjustment of tariffs, using the Telecommunications Pricing Index, is critical to our continued viability as a business.
Consistent, high quality grid power supply remains a challenge. This means that we make use of diesel-powered generators to supplement what we draw from the national grid. As a result, we continue to see an increase in our carbon footprint as well as the cost of doing business.
We continue working to enhance our green footprint and reduce carbon emissions by increasing the number of solar powered base station sites.
Delivering a digital lifestyle through connectivity, gaming, and music has been an important theme in this review period. From financial services to e-commerce, digital adoption in Zimbabwe has accelerated at an extremely rapid pace, spurred on by public health and safety concerns during the COVID-19 pandemic. As a result of the increased uptake of digital services, our data products have increased in their contribution to revenue from 24.8% to 29.2%. In response, we embarked on several initiatives to support the growth in data traffic and increased LTE/4G data speeds by 50%, commissioning 12 new LTE sites countrywide and accessing additional 3G spectrum under the POTRAZ COVID-19 relief programme. We have also facilitated the import of low-cost data-capable handsets to ensure data connectivity is accessible across all sectors of society (though as mentioned in our previous reports, the duty regime on devices for accessing the network increases the cost of connectivity for our consumers).
The Group continues to innovate and introduce channels for digital customer support to accelerate customer query resolution and reduce dependence on brick and mortar infrastructure. Customer engagement platforms launched to date include; Yemurai Chatbot 1.0 release, USSD selfcare, web self-care, IVR self-care and SMS help. More than 90% of our customer interactions were handled through these digital self-care channels representing a 200% year-on-year growth. We witnessed a significant improvement in our customer effort score, which measures the effort customers undertake to reach our various channels. We continue our journey in the use of artificial intelligence (AI) for a more intelligent and personal customer experience in terms of support, product offerings and predictively managing platforms performance and network quality of service.
With a subscription of over 1 million customers, the YoMix platform has been popular amongst the youth and continues growing in popularity. The YoMix App is a do-it yourself (DIY) mobile application that empowers customers to customize their voice, data, SMS and digital service offerings through personalized bundling.
The report of the Directors is based on inflation adjusted financial statements which are the primary financial statements. Historical financial statements have been presented as supplementary information. The Directors caution users of the financial statements on the usefulness of these reported financial statements, in light of distortions that arise when reporting in a hyperinflationary economy.
Revenue increased to ZW$35 billion, an increase of 23% from the previous year, largely due to the increase in data usage, which increased by 47%. Improving operational efficiencies and continued cost containment measures yielded positive results which saw the earnings before interest, taxation, depreciation and amortization (EBITDA) margin increase to 52%. Net exchange losses, decreased by 46% to close the year at ZW$13.7 billion. Capital expenditure investment remains subdued due to the scarcity of foreign currency. Our earnings per share increased from a loss of 237 cents per share to a positive earnings per share of 35 cents.
Our cash flow remains positive and we continue