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Depreciating Zimdollar erodes tariff increase benefits: Econet

ECONET Wireless Zimbabwe Limited (EWZ) says the volatile operating environment is eroding any benefits from the adjustments to the tariff regime,

ECONET Wireless Zimbabwe Limited (EWZ) says the volatile operating environment is eroding any benefits from the adjustments to the tariff regime, despite a 100% upwards review on voice and data charges last month.

Last month, the Postal and Telecommunications Regulatory Authority of Zimbabwe increased voice tariffs to US$0,40 per minute and data to US$0,63 per megabyte.

In a statement accompanying its half year financial results for the period ended August 31, 2023, EWZ chairperson James Myers said viable pricing of telecommunication services remained a key factor for the continued growth and sustainability of the industry.

“The volatile operating environment continues to significantly erode the benefits of any tariff adjustments. Regular and effective tariff reviews that track inflation and exchange rate movements are critical to ensure the viability and sustainability of the sector,” he said.

“According to the Postal and Telecommunications Regulatory Authority of Zimbabwe, voice and data tariffs remain at discounts of 58% and 88%, respectively (compared) to the region.”

While tariffs remain low for telcos, these remain expensive for consumers as most earn their salaries in local currency.

The call for another review of tariffs comes as EWZ revealed that the company reported an 186% growth in revenue to ZWL$1,1 trillion, with ZWL$400 billion of that amount going to statutory payments in the form of taxes and levies.

The growth in revenue is from a 2022 comparative of ZWL$384,39 billion.

“The company’s statutory payments, which are a 246% increase from the ZWL$114 billion it paid in the corresponding period last year, is more than 10% of the country's projected ZWL$3,9 trillion revenue collections in the 2023 national budget,” Myers said.

However, the depreciating local currency caused the group to incur exchange losses amounting to ZWL$375 billion representing 34% of revenue against a prior period comparative of 39%.

Further, total costs and expenses more than doubled during the period to ZWL$551,48 billion, from the 2022 comparative of ZWL$209,54 billion.

Direct network and technology operating costs, other network costs, and staff costs drove this increase.

Myers said from an investment level of less than 5% of revenue in previous years, capital investments for the period rose to 24% of revenue, in the period under review.

“As a result, we modernised 252 base station sites in the first quarter, and 439 base station sites in the second quarter, covering Harare and Bulawayo,” he said.

EWZ only has US$0,92 to every dollar of short-term debt raising questions whether it will have enough capital to fund its 2024 activities.

This was driven largely by interest bearing debt, bank loans advanced by various financial institutions from October 2022 through to August 2023 denominated in United States dollars.

The increased revenue led to a profit after tax of ZWL$63,65 billion during the half year period, overturning a loss of nearly ZWL$20 billion in the comparative 2022 timeframe.

Adjustments to property, plant and equipment as well as right-of-use assets saw total assets rise by 61,35% to ZWL$3,31 trillion in the period under review, from February’s ZWL$2,05 trillion.

“Transforming our business model to a fully-fledged digital service provider remains an urgent imperative. We will continue modernising our network infrastructure to unlock opportunities presented by emerging technologies to broaden and diversify our service offering,” Myers said.

“Artificial intelligence and process automation will be pivotal in improving operational efficiencies and customer service delivery.”

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