Our business supports the growing demand for digital services in line with our strategic intent to become a fully-fledged Digital Services Provider. Digital services and next-generation connectivity have become central to people’s livelihoods. As a result, globally, the telecommunications sector is increasingly leveraging on emerging technologies for hyper-connectivity, cybersecurity, cloud computing and artificial intelligence to fulfil these fast changing customer demands. Econet Wireless is not left behind in adopting these technologies to fulfil our vision of a digitally connected future that leaves no African behind.
Environment and Regulatory Review
Providing quality services, which not only meet but exceed our customer expectations is at the core of our endeavours. Whilst concerted efforts were made to meet these standards, our efforts were continuously hampered by extensive load shedding on the national power grid. For the period under review, load shedding averaged 18 hours a day. Consequently, the business resorted to alternative sources of energy to power the network. This significantly increased our cost of providing services to our customers.
The business also experienced vandalism on our critical network infrastructure. To reduce vandalism on our network equipment, the business instituted various monitoring and deterrent measures to secure the various network elements that are being targeted.
In order to stay abreast of technological advancements and better serve our customers, we added twenty-two (22) 5G base stations during the year. We remain the only network in the country with 5G technology. We are the only network certified to support Apple devices. Our 5G and network modernization rollout plan will increase access to newer technologies such as virtual, augmented, and mixed reality, ultra-high-definition video (UHD) streaming, Internet of Things (IoT) and Artificial Intelligence (AI).
To meet the growing demand for both voice and data traffic, we commissioned eighty (80) new base stations providing additional coverage and capacity. We commenced the deployment of a new modern core network with new generation cloud capabilities.
As part of this network modernization effort, we also deployed state of the art data center infrastructure to ensure high availability of the network.
We have started deploying a new digital Know Your Customer (KYC) platform on a phased approach. The platform leverages on digital identification and will centralize group KYC capabilities, distribution, and other partner management services. This shared service enables convenient access for our customers to our digital ecosystem and our partner services as well. All digital ID subscribers will have greater ability to do more self-service activities on our group platforms.
As we continued to drive digitalisation and digital adoption in line with our digital service provider (DSP) strategy, the business continued to promote self-help and self-care platforms for the convenience of customers. We re-launched an enhanced Yamurai (WhatsApp Bot) and increased our capacity on self-care and social media platforms. Our contact centre also adopted a new automatic call distribution (ACD) system, which enables us to handle more customers efficiently and effectively.
Charges applicable to all mobile network services provided by the business are regulated by the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) based on sector specific economic models. The business acknowledges the various interventions that the Regulator has granted the sector in a bid to align operating costs with revenue generating activities. However, tariffs continue to fall behind inflation because of rapid changes in the macro-economic environment. This disparity occurs because tariffs for the sector are determined in the local currency, based on movements in inflation and in the exchange rates. This put significant pressure on operating costs on the backdrop of grid power load shedding challenges. The prevailing tariff environment is a threat to the long-term viability of the local telecoms sector and curtails the ability of the sector to invest appropriately to meet customer demand, thereby undermining the quality of service.
The financial review is based on inflation adjusted financial statements which are the primary financial statements. Historical cost financial statements have been presented as supplementary information. In order to comply with International Accounting Standard 29 – “Financial Reporting in Hyperinflationary Economies” in the preparation of its consolidated financial statements, the Group estimated and applied inflation rates for February 2023 based on the Total Consumption Poverty Line published by ZIMSTAT. The estimation of the consumer price index is permitted by IAS 29 where a general consumer price index is not readily available. The Directors caution users of the financial statements on the usefulness of these reported financial statements, considering distortions that arise when reporting in a hyperinflationary economy.
Group revenue recorded a 20% rise driven by growth in voice and data usage of 19% and 58%, respectively. The Regulator granted the sector three tariff adjustments of 61% each and a fourth adjustment of 50% during the year. The tariff adjustments were not adequate to offset the increase in inflation which closed at 230% in January 2023. Despite the revenue increase on account of usage, the earnings before interest, taxation, depreciation, and amortization (EBITDA) margin decreased from 52% to 40% for the year under review. The disparity between the revenue growth and EBITDA margin is reflective of the sub-economic tariff environment coupled with accelerated exchange rate depreciation.
The local currency lost value by more than 85% during the year under review which had a negative impact on overall profitability. The Group incurred exchange losses of ZW$ 77 billion which translated to 23% of revenue against a prior year comparative rate of 6% of revenue.
The business invested US$ 66 million as part of its network modernization program. Network expansion and upgrades remain imperative to support business sustainability, which has been hampered by several years of under investment, due to ongoing macro-economic challenges.
Subsequent to the year end, the Company’s debentures matured at the end of April 2023. The Company has been unable to secure foreign currency for the purpose of redeeming the debentures via the RBZ’s foreign currency auction process. Whilst the Company does generate some foreign currency from its operations, this is being deployed to pay for essential mobile network and related technology upgrades and expansion.
Accordingly, the Company has announced a renounceable rights offer to raise US$ 30.3 million of foreign currency from its existing shareholders. A circular with further particulars will follow.
The Directors resolved not to declare a dividend for the year due to the need to capitalize the network.
Corporate Social Investment
Our corporate social investment initiatives remain focused on three pillars, education; global health; and rural transformation and sustainable livelihoods.
Through our implementing partner, Higherlife Foundation, we also invested in improving the quality of education by providing training and capacitation programs for educators. As part of efforts to strengthen early childhood development and improve the quality of education for foundation phase learners, we provided literacy and numeracy training to more than 1,300 foundation phase educators across the ten provinces in Zimbabwe. In total, more than 3,400 educators were trained on foundational learning methodologies, positively impacting 173,600 students.
Through the global health program, we catalyse initiatives and projects to broaden access to affordable, high-quality healthcare for Zimbabwe’s most vulnerable populations. Higherlife Foundation is the implementation partner for various projects working closely with the Ministry of Health and Childcare.
As we pursue our vision of a digitally connected future that leaves no Zimbabwean behind, we will continue to innovate in order to give a unique digital experience to our customers. The consumption of digital services is expected to continue growing. We have a strong platform to anchor our transition to a fully-fledged digital services provider. Exploiting 4G and 5G network enabled opportunities will be key to keep abreast with emerging global trends and improve service delivery.
On behalf of the Board, I extend my profound gratitude to our valued customers who continued to support the business through this challenging period. I would like to recognise the invaluable support that we continue to receive from our partners. I commend and thank our staff for their contribution, passion, and commitment to the business. To my fellow Board members, allow me to extend my sincere appreciation for your guidance and continued support.
Dr. J. Myers
Chairman of the Board
23 May 2023
Econet Wireless Integrated Annual Report – 2023.pdf
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