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Econet half-year results demonstrate resilience amid economic challenges: Analysts

27 November 2023

Despite navigating a complex economic landscape, Econet Wireless Zimbabwe posted a set of half-year financial results that demonstrate resilience and adaptability.

This is according to analysts, who say the company’s revenue growth, effective cost management and proactive financial strategies augur well for the telecommunication and technology company’s medium to long-term prospects, despite the challenging business environment it is operating in.

In the six months ended August 31, 2023, Econet’s revenue grew by 186% to ZW$1.1 trillion, compared to ZW$384 billion reported in the same period last year.

The growth was attributed to a 24% and 25% surge in volume of voice and data services respectively, demonstrating the company’s ability to effectively leverage evolving customer needs.

The company’s EBITDA margin also grew from 45.2% to 51.19%, a ratio analysts said demonstrates Econet management’s ability to manage costs and drive operational efficiencies.

While exchange losses arising from historical US dollar-denominated liabilities, spurred by a weakening local currency, continued to impact the company’s bottom line for the period under review, analysts said going forward Econet has demonstrated the capacity to weather the headwinds.

Equities research firm IH Securities said Econet’s successful offer to shareholders of a renounceable rights issue to raise US$30.3 million, most of which was used to extinguish foreign currency debt, was a strategic and insightful move.

“Consequently, we expect the foreign exchange losses that have plagued the group for the past few years to taper off, positively impacting profitability to FY24,” the research company said.

Econet incurred exchange losses of ZWL$287 billion in the period under review, against a revenue performance of ZWL$1.1 trillion, with the exchange losses representing 34% of total revenue.

Investment analyst Courage Namaungwe noted that with Econet no longer saddled with the burden of the debentures (debt) which has since been expunged through the rights offer, Econet was now set on a “sustained growth trajectory”.

“The debentures which brought about these losses have been paid off… It was a very prudent move in my view – shareholders will reap the benefits in future,” Mr Namaungwe said.

IH Securities observed that Econet’s increased investment level of 24% of revenue, up from less than 5% in previous years, demonstrates the company’s drive to improve service quality and coverage through the modernisation of its network infrastructure.

During the half year under review, Econet invested 24% of its revenue towards capital expenditure programmes and leveraged its partnerships with major equipment vendors to modernise close to 700 base station sites on its network.

The investment led to improved network performance, capacity upgrades and expanded geographic coverage.