TELECOMS giant, Econet Wireless Zimbabwe Limited (EWZL) posted a significant loss for the half year ended August 31, 2019 of $1,28 billion, blamed on the Zimdollar devaluing and forex losses.
BY TATIRA ZWINOIRA
In June, government reintroduced the Zimbabwe dollar as the sole legal tender, albeit, with inadequate foreign currency, market confidence and mineral backing causing the currency to devalue.
As such, Zimbabwe’s second largest company on the country’s main bourse, EWZL, has reported an adverse impact of this devaluation for the period under review. In the six months ended August 31, 2018 the company posted a profit of $304,79 million.
“The group’s results for the period under review were significantly weighed down by the accelerated depreciation of the local currency,” said EWZL chairperson James Myers, in a statement accompanying the firm’s financial results for the period under review released yesterday.
“Group revenue for the half year to 31 August 2019 was ZW$ 1,3 billion. The Earnings Before Interest Taxation, Depreciation and Amortisation (EBITDA) margin was 42%. Management implemented appropriate cost efficiency strategies in light of the deteriorating economic environment.”
Since the unbundling of the group’s technology segment into Cassava Smartech Zimbabwe Limited, EWZL has had to rely on voice, SMS and data revenue as its main source of income.
However, Myers said due to the inflationary conditions in the country (caused by the devaluing Zimbabwe dollar), for the period under review, tariffs are lagging behind inflation.
“Voice, SMS and data tariffs charged in Zimbabwe are now among the lowest in Africa. This is at a time when the country is experiencing up to 18 hours of power outages and our network is running almost exclusively on diesel generators, a situation which is clearly untenable,” Myers said.
“The company and other operators continue to implore the Potraz and the government to consider the impact of these debilitating challenges on the viability of the sector and the negative impact on our ability to offer quality service to customers.”
He said the group would continue to customise consumer packages to consider the unique needs of each consumer segment in light of the prevailing challenges in order to adopt a “responsible approach” to pricing products and services.
Further, as a result of foreign currency obligations, the group recorded foreign exchange losses of $1,9 billion for the period under review from 2018’s comparative of $1,53 million.
These obligations concern EWZL’s main equipment suppliers; ZTE of China and Ericsson of Sweden who are allowing the telecoms firm to continue to run its platforms without security of payment for maintenance services.
“This support has been necessary to ensure that near normal operations are sustained. This has unfortunately resulted in a build-up of foreign currency obligations that require settlement. The resultant exchange losses have negatively impacted the performance of the company,” Myers said.
The loss for the period also saw the group post a 50,2 cent loss in basic earnings per share in the period under review from 12,8 cents recorded in the 2018 comparative.
However, Myers said the net foreign exchange position of the group was positive due to its just under 10% stake in Liquid Telecoms worth US$135 million.