Financial analysts have predicted an 8.9% decline in annual revenues for Econet Wireless Zimbabwe’s financial year ending February 2017.
According to a forecast from local equities research and trading outfit IH Securities Research, Econet Wireless – which is the country’s largest mobile network operator with the largest market share – will likely face an 8.9% decline in annual revenue for the 2016-2017 financial year with revenues expected to reach US$584 million.
A further 0.7% decline to US$580 million is anticipated for the next financial year (ending February 2018). Net income forecasts are set at US$32.9 million for the 2016-2017 year and $50.5 million for the 2017-2018 year, representing a 56.6% increase driven by debt management.
A recovery in revenues to get beyond the US$600 million mark is anticipated after 2018 on the back of “continuous innovation, and greater contribution from EcoCash and broadband”.
Operating in a tough economy & telecoms environment
Econet’s revenue decline has been blamed on liquidity challenges, low disposable income and regulatory interference.
The first two factors aren’t unique to Econet or the telecoms industry since the majority of local businesses have taken a huge hit because of these macroeconomic realities.
Zimbabweans aren’t spending as much as they used to a few years ago due to shrinking incomes while the liquidity challenges have contributed to consumers’ reprioritisation of spending obligations.
As a telecoms entity, Econet’s numbers are also facing an industry-wide disruption highlighted by less calling and the adoption of cheaper Over the Top communication alternatives like WhatsApp.
This has contributed to a steady decline in voice communication which is the largest driver of revenue for Econet’s core service – communication.
Then there’s the issue of regulatory intervention, represented by licence fees as well as taxes and levies that have been piled on Zimbabwean telecoms operators.
In January 2016 the government raised the telecoms operators’ Universal Services Fund contributions from 0.5% to 1.5% and in 2015 a 5% tax on all airtime purchases announced in the 2014 National budget took effect.
In 2017 another 5% airtime tax is set to be introduced as part of the government’s plans to mobilise funds for a health fund.
Econet has complained about these burdens, pointing out how 27.5 cents off every dollar that it makes is directed to State obligations, a number that’s set to rise to 32.5 cents after the Health Levy is introduced.