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.
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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.