The Post and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) released the abridged sector performance report for Q2 2020. The effects of the COVID-19 pandemic were palpable when it came to industries like the postal sector. The other inescapable force that affected the performance of the sector in Q2 was the deteriorating Zimbabwean economy. No sector felt this more than the Mobile Network Operators (MNOs) who collectively made losses of more than 500% in Q2 (when you consider operating expenses inclusive of exchange rate losses).
The reading of the report starts off on an encouraging note. In Q2 mobile network operators were able to grow profits by 45.8% recording ZWL$3 billion which is up from the ZWL$2.1 billion posted in Q1. Their operating expenses in the quarter without accounting for any foreign exchange losses was ZWL$2 billion which makes their profitability 33%.
However, when operating costs inclusive of foreign exchange losses are accounted for, a figure that stands at ZWL$16 billion. The picture quickly becomes grim.
“The increase in operating expenditure is attributable to the inflationary operating environment. The telecommunications sector is also capital intensive and heavily reliant on debt financing, the fluctuations in the exchange rate have resulted in huge exchange losses on debts to be serviced.”POTRAZ Q2 2020 Sector Performance Report
Econet and other MNOs are reliant on foreign currency in order to finance some of their operations. MNOs will have, for example, borrowed forex earlier in the year when the rate was lower. But with the out of control nature of the exchange rate in Q2 of 2020 (and beyond), MNOs will have to pay back that forex at the current exchange rate.
If we are to look at the money that they actually made which is ZWL$3 billion and compare it to expensive inclusive of foreign exchange losses (ZWL$16 billion), losses were well over 500%!
This is very concerning. There is a big hole that has been dug here and it is very difficult to see how the operators will climb out of it especially if the local currency deteriorates further.
Quick NetOne, Telecel, Africom, And Econet Airtime Recharge
If anything goes wrong, chat with us using the chat feature at the bottom right of this screen