The road the lies ahead for local telecoms is going to be pretty tough and by now every operator has started making the necessary adjustments for very tough 2016. Market analysts have also chimed in with similar predictions of a tough spell for the largest operator, Econet Wireless.
Local stockbrokers, Lynton Edwards have projected a 21.3% drop in revenue for the period ending February 2016 along with a 49% reduction in net profit. According to these measures, Econet’s revenue will stand at $587 million and profit for the full year will come to $35,4 million.
These predictions are being backed by the changes that have taken place in the local business environment and in the Zimbabwean telecoms industry, changes which have created an increasingly challenging business arena.
These have included lowered voice tariffs, added taxes on products like airtime, duty attached to mobile devices as well as macro-economic stresses such as as a deflationary environment and lowered consumer spending.
Other indicators for forecasts on Econet Wireless future performances have been a pattern of falling revenue most recently displayed by the 17.7% decline in revenue experienced for the half year ending August 2015 against the same period last year, and a 47% drop in profit for the same period. The previous annual results for the year ending March 2015 also reflected a decline in profit of 41% and a slight drop in revenue.
It’s time to prepare for a tough spell
While Econet has continued to put up a valiant fight through the introduction of a new products and services and it has managed to kick off a very uncomfortable cost cutting regime, most of the efforts for the new services aren’t envisaged to grow revenue. As Lynton Edwards puts it;
While Econet continues to bring new products to the market, we do not believe this will result in revenue growth in the short to medium term. At best the continued diversification of revenue will help reduce the rate of revenue decline.
Some consolation for shareholders in the fact that most of what can be done by Econet has already been started. If this is paired with utterances by telecoms, the mobile regulator, that it will consider changes in the environment before effecting the next round of tariff adjustments, then there is some hope for Econet after all. But in any case, it’s time to batten down the hatches because winter is here.
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10 comments
Is it bleak or finally Econet will be operating at normal profit margins, I guess they just have to adjust to normal.
They just need to reduce on some of their tariffs like Whatsapp bundles, data bundles, etc.
It doesnt need all these so called economic forecasters to predict the future of companies and decline in profits.
The time of Gonomics are over and gvt is realising money does not grow on trees, you do not just print like what Gono used to do.
The greedy and money burning mentality is slowly washing away and most companies are realising that you make more money not by miracles but practising effective business means.
Profits will continue to slide down as the economy adjust itself to the real power of $US.
Corruption will also have to come because you cannot continue to loot the dollar without replacing what you took.
Maybe a door to door house search in the leafy suburbs, offices will help us quickly return the hidden away green bucks.
I agree with your observations. Businesses were just replacing the $z with the $us sign and the figure literally remaining the same!!
I have the same sentiments. The challenge in Zim is we pegged with the wrong currency. We should have used the ZAR. The dollar does not fluctuate sufficiently to compensate for zimbabwean economics and it never will. The FED will not revalue the US in order to help Zim!
on a side note has anyone noticed that you can change currencies in ecocash now?
Econet should start a pay TV service.
Already running a pilot in south africa. was covered here… its called ipidi
look at how much econet pays liquid! lol this is a joke, all they are doing is moving money around internally. so when econet looks like its not making a profit, liquid is making a profit! but wait, liquid borrows money so they are exempt from taxes on certain amounts! these guys are smart they just want us to think profits are down when in actual fact econet global is making loads of money!
For those who like everything Econet, I have bad news. Imagine the quality of your life when all its aspects are controlled indirectly by EW. Voice, data, Ecocash, Steward bank, ConnectedCar, ConnecteHome all from one service provider? What remains to be called “private” when that is in place. No thanks – I like my freedom of choice much better than trade it to one SP whose next step is so unpredictable it makes any normal person uneasy!!
You freedom of choice does not create companies!!
Companies are made out of investment, at the moment, our gvt is broke and investing nothing, that limits the number of choices. Until other companies come in to invest and compete with Econet, your freedom of choice will remain located in dreamland.
And the way our gvt is behaving, either you are going to be stuck with Econet forever because who wants to invest his her money where laws are changed according to political feelings!
Or econet will be gone(destroyed) then left with no options at all! Back to days of kuridza mabhosvo for sending message.