Econet seeks to stabilise with share buy-back scheme
Management at Zimbabwe’s Econet Wireless is confident that the company will be able to pay off its debt obligations and remain with adequate equity reserves after undertaking a share buyback scheme for which it will seek shareholder approval at next month’s virtual AGM.
The company is already in a precarious position, with local shareholders likely to be affected by an expected shift in the company’s debentures matrix.
In its 2020 annual report, also released over the weekend, Econet said although the debentures issued during a 2017 rights offer exercise continue to be accounted for in US Dollar currency, “this position may change in future in order for the company to comply” with monetary authority policy and regulations.
Other investors in Zimbabwe have been affected by the country’s shift in accounting currency from US Dollar to local currency.
The country has once again shifted and is now embracing multiple currencies for various functions.
Econet stated: “This may particularly impact local shareholders who participated in the rights offer using onshore dollars whose counterpart offshore dollars were provided by the rights offer underwriter.”
The company’s business year runs up to the end of February and management is now pushing for a share buyback as it winds up a difficult year dominated by the impact of COVID-19
After considering the effect of the “maximum repurchase of the shares,” the company is confident that it will be “able to pay its debts for a period of 12 months” and that its assets “will be in excess” of liabilities.
“The share capital and reserves of the company are adequate for a period of 12 months (and) … the company will have adequate working capital for a period of 12 months,” said Charles Banda, company secretary for Econet in a notice on Friday.
Revenues have been under pressure for Econet, although the pandemic also presented the company with some impetus to push its digital strategies.
According to the 2020 annual report, average revenue per user numbers in Econet Wireless – which has mobile and Fintech operations among others, declined from more than ZWL60 in 2019 to ZWL30 during the period under review. The official rate in Zimbabwe is 1:83 for US Dollar versus Zimbabwe dollar, while on the parallel markets it has ballooned to 1:105.
Despite this, there is massive upside for the company in mobile internet and related value added services – although low uptake of smartphones could impact negatively.
Econet says it covers about 70% 3G coverage nationally for data services, while the internet penetration rate in Zimbabwe is at 59%.
A lack of foreign currency in 2020 hampered efforts to increase capacity and coverage of internet service coverage, including LTE.