Econet laments forex shortages

HARARE – Econet says limited access to foreign currency is hampering its efforts to fully roll out network upgrades, as it prepares the country for digital opportunities coming from the growing digitalisation drive.

The telecoms giant recently launched the first 5G network in Zimbabwe reaching throughputs of up to twenty times higher than 4G as the group seeks to enhance digitalisation.

This also comes as digital technologies evolve and the Fourth Industrial Revolution gathers momentum.

However, chairman Dr James Myers said limited foreign currency availability remains a major setback for the capital-intensive programmes.

“We are limited in our ability to meet network upgrade requirements due to continuing issues related to accessing foreign currency to maintain the necessary Capex investment to appropriately grow the network.

“This impacts our ability to roll out to previously underserved areas, such as the rural areas and/or new towns/townships,” he said in an update for the year February 28, 2022.

The group has however managed to roll out network upgrades to improve customer carrying capacity and these upgrades included the deployment of ten greenfield base stations, and upgrading one hundred sites, across the country, from 3G to 4G, as part of efforts to increase the 4G network coverage.

“Although these upgrades are in line with our continuing process to digitalize our network, they are far less than what is required to achieve our objectives,” he said.

Dr Myers also said investment in infrastructure over the years has been on a downward trend as a result of acute foreign currency shortages in the country. The business has been investing an average of 5 percent of revenue compared to other telecommunication peers in the region whose average annual capital investment is over 15 percent of revenue.

“This continues to have an adverse effect on the customer experience,” he said.

In terms of financial performance, the telecoms giant registered a 33 percent increase in revenue to $87,3 billion from $57,9 billion recorded in the previous year, while profit after tax surged to $12,2 billion from $1,3 billion in the previous corresponding period.

The company paid an inflation-adjusted $31,1 billion in government taxes and levies, the equivalent of more than a third of its total revenues, up from the $20,3 billion it remitted in statutory payments in the same period last year.

Econet experienced exchange losses of $5,1 billion in the period under review, which however rose to $13,4 by May 31, 2022, soon after the end of the financial year, on the back of a weakening local currency.

“The official rate was devalued from $124 to the US dollar to $338, a depreciation of 172 percent, thereby eroding the gains made by the company in the year ended February 28, 2022,” said Dr Myers.

He also lamented the impact of the acute depreciation in the local currency – which lost more than two-thirds of its value against the US dollar this year – on the company and the industry’s tariffs, which were last reviewed in September 2021 during the reporting period.

“The inflation that was experienced since that time has not been factored into our pricing framework as at February 2022, meaning that our tariffs are now unviable for the business to continuously invest to meet the increasing demand for its services,” he said.

Econet did not declare a dividend as the group continues to assess the economic environment. – Business Weekly