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Econet battles foreign exchange crunch



ZIMBABWE’S largest mobile phone operator by subscription and revenue, Econet Wireless, says the country is facing a foreign exchange crunch which will push its capital expenditure to US$135 million over the next 12 months.


Desperate to tame rising inflation and save the local currency from collapse, the authorities in Harare eased exchange control restrictions and allowed the use of the United States dollar and the domestic currency as legal tender.

Now the authorities are up in arms with retailers and service providers who are demanding payment in forex.

Econet in its trading update for the quarter ended 31 May says inflation and a weakening local currency have continued to be a challenge for the broader economy and the telecommunications sector in particular.

The last tariff review for the sector, the company says, was carried out when the interbank rate was 1 000.02, which in comparison to the interbank rate of 2 577.06 at the close of the quarter under review was a significant depreciation of 158%.

The company says it continues to witness an increase in the demand for its services. Usage of voice and data for the quarter under review grew by 30% and 31% respectively.

“This increase in volumes requires further investment into the platforms and systems that drive network capacity and capabilities,” Charles Banda, the company secretary, said in a statement accompanying the trading update.

“Our capital expenditure programme which continues to be constrained by lack of availability of foreign currency to pay our suppliers over the next 12 months is expected to be about US$135 million. This capital expenditure will require a supportive pricing regime given the inflation trends and currency depreciation.”

Econet says it is in the process of implementing a virtualised core network that will replace the current core network system.

“The core network is the nerve centre of all the complex network activities that take place in providing the services we provide to our customers,” the company says.

“This upgrade will enable the company to launch additional products and services and implement faster product changes to enhance the customer experience. We also plan to upgrade our radio network in Harare, Bulawayo and Manicaland by the end of the 2023 calendar year. For the period under review, the business upgraded 30% of our Harare and 70% of the Bulawayo base station sites. We have since seen an increase in the speed and volume of data consumed by our customers, as a result of these upgrades.”

In inflation-adjusted terms, Econet reported an increase of revenue for the quarter of 137% compared to the same period last year. The company says inflation over the same period has eroded much of the gains made due to a comparable increase in costs.

“Exchange losses remain a challenge. The company has approved a renounceable rights offer to raise US$30.3 million to be applied towards redemption of our maturing debentures. More details on the structure and timing of the capital raise have been provided in our various public announcements,” the trading update says.

“We expect the operating environment to remain challenging in terms of below inflation tariff adjustments, FX [foreign exchange] headwinds and inflation. We, however, expect the demand for our services to remain robust.”

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