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Econet seen narrowing losses

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ECONET Wireless is seen narrowing losses this financial year before returning to profitability next year as stability in the exchange rate is expected to reduce foreign currency exchange looses, a research firm has said.

During this financial year, which ends in February, profitability is likely to remain under pressure as the group has already accrued foreign exchange losses during the first half, brokerage firm IH Securities said.

But the reintroduction of the foreign currency auction system in June last year brought stability on the exchange rate and “will work to the advantage” of the telecoms giant. Econet will likely record 521 percent growth in revenue to $21,62 billion in FY21 from $3,48 billion during the same period in 2020.

Turnover would further increase to $33,63 billion in FY22, showed estimates compiled by IH Securities. Earnings before interest, tax, depreciation and amortisation is seen rising to $10,16 billion in FY21 and $15,13 billion in FY22.

Profit after tax would increase to $7 billion in 2022.

“Moving forward, we forecast the group’s performance to take a new trajectory,” said IH in their earnings review.

“We anticipate stability in exchange rates to drastically reduce foreign currency exchange losses though some element of exchange rate risk remains.  Resultantly, we expect the group to gradually move from a loss position to a profit position and we anticipate year 2021 to close at a loss position of $515 million, while 2022 is expected to register a profit after tax of $7,35 billion,” said IH Securities in their earnings review.

Tariff reviews effected last year would help the group narrow its loss position during the second half of 2021.

POTRAZ, the regulator of Zimbabwe’s telecoms industry last year introduced an inflation linked pricing system based on a specific price index for the sector, referred to as the Telecommunications Pricing Index.

This pricing system takes into account telecommunication operator costs and inflation to determine a viable tariff to ensure operational sustainability while balancing the need to keep telecom services affordable for consumers.

“We expect this index to bring some measure of viability to the telecommunications sector,” said IH Securities.

In their recent third quarter trading update, Econet indicated its focus would remain on coming up with innovative solutions at a time the world is grappling with the devastating effects of coronavirus pandemic.

This also comes as the country is adopting digitalisation that has been accelerated by the Covid-19 induced lockdowns.

Said IH Securities: “We foresee Econet continuing to lead this new era and keeping on unlocking interminable opportunities the revolution presents, reaping off the benefits that come with being a pioneer and with such diversification.”