Econet Wireless Zimbabwe’s financial results for the year ending February 2020 are out. The country’s largest mobile network operator (MNO) ended the 2010s on a financially challenging note. For the first time in the decade, Econet posted a loss of ZW$1 352 966 000. Yes, over a $1 billion in losses – quite the number.
Within the report, Econet attributed this number to foreign exchange losses which lost the company ZW$6.1 billion;
The Group’s exposure in foreign currency-denominated obligations resulted in exchange losses of ZW$ 6.1 billion
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Foreign exchanges losses occur when a company buys or sells goods/services in a foreign currency and the currency fluctuates relative to their home currency. In the context of Econet, the infrastructure required for their network maintenance and servicing is bought using forex and the service they sell is sold in ZW$.
We all saw the ZW$ go on a freakish descent and lose its value in 2019 thus resulting in the currency fluctuation. Because the ZW$ (which is the home currency in this situation) lost its value after conversion – Econet made foreign currency losses (i.e exchange loss).
Having looked at POTRAZs Q2 2020 report a few weeks ago, it’s not entirely surprising that foreign exchange losses are hurting MNOs this much. In that report, POTRAZ noted that operating costs including foreign currency losses for MNOs in the first half of 2020 amounted to ZW$21.1 billion.
The fact that the foreign currency losses ballooned in Q2 is also worrying because it means exchange losses will probably have a big effect on Econet’s balance sheet again going forward.
Discounting the exchange losses made by Econet, there are some positives. The company was profitable in certain regards. The MNOs profit from operations was ZW$1.1 billion.
- Econet also increased their revenue by 31% from ZW$5.2 billion to ZW%6.8.
- Market share for data traffic increased by 4%
- Market share for voice traffic increased by 4%
These results were published on the 30th of October and this is a bit weird considering that the results are for the year ending February 2020. The delay was because Cassava postponed the publishing of their results because of EcoCash’s regulatory reviews earlier in the year.
For example, in the report, Econet highlights growing their subscriber base to 12.6 million subscribers. From the most recent report from POTRAZ we know that the MNO lost a significant number of customers – 8.4% bringing their customer base down to 8.7 million subscribers.
PS: The discrepancy between Econet and POTRAZ numbers above for subscribers is probably because POTRAZ records active subscribers.
Beyond this we also know that Econet’s mobile voice traffic market share dropped and the overall mobile traffic dipped in Q2.
Anyway, this is a discrepancy that is just a reflection of how weird 2020 has been as a year and not necessarily Econet’s fault. Hopefully the MNOs profitability improves going forward.
PS: An earlier version of this article stated that the reason for delay in publishing the results was due to COVID-19. This was incorrect. The actual reason issued by Econet was that there was a delay in the publication of the audited financial statements of Cassava Smartech Zimbabwe earlier this year due to regulatory reviews on EcoCash. Apologies for the mistake