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Zimbabwe's Econet intensifies cost-cutting measures

By , Journalist
Zimbabwe , 31 Oct 2016

Zimbabwe's Econet intensifies cost-cutting measures

Zimbabwe telco Econet Wireless has scaled down capital expenditure intensity from 16.6% to just 5.1% in response to regulatory directives such as termination of promotions and enforcement of quality of service laws.

In the half year to end August, Econet Wireless reported a fall in revenues from US$323 million to US$301 million.

After tax profits for the period also declined heavily from US$23.8 million to US$14.9 million on the back of constrained economic conditions that have hampered consumer spending. As a result, Econet will intensify its focus on cost reduction in order to grow the profit base and raise data revenue.

According to Econet Wireless, the Posts and Telecommunications Regulatory Authority of Zimbabwe (Potraz) "promulgated new Quality of Service Regulations into law" during the period under review and also asked mobile operators to terminate voice and data promotions offered by Zimbabwean telcos.

"Whilst the Company has strived to meet these (service quality) standards, the ongoing liquidity challenges have hampered our efforts to continuously invest to meet increasing capacity demands," Econet said on Monday.

"Consequently, our capital expenditure intensity decreased from 16.6% to 5.1%," said James Myers, Chairman of the board.

Notwithstanding the revenue and profit dip, Econet Wireless says it has "continued its focus on growing revenue, particularly from data and mobile financial services" segments. It did not declare a dividend for the half year period, citing difficult economic conditions in the country.

Compared to the same period last year, data revenue for the 2016 interim period climbed up by 10.5% to US$58 million. Mobile money revenues for the period also spiked 13.6% to US$39.2 million.

"Econet pays US 23 cents of every dollar that it collects from its customers in Value Added Tax (VAT), Excise Duties and Licence fees as well as in contributions to the Universal Services Fund. This is in addition to paying corporate taxes on profits, import duties, other levies," Myers added.

During the six month period, Econet undertook a program to modernise its network, resulting in the deployment of over 400 new LTE sites and upgrades to over 250 3G sites. To strengthen its data capacity, an additional 88 new Wi-Fi coverage sites were enacted across the country.

The upgrade exercise is expected to enhance the experience for subscribers through "increased data capacity and performance" while the company's "data billing capacity was upgraded to cater for increased data traffic".

Connected subscriber numbers on the Econet network in Zimbabwe grew by 9.1% to about 10 million while Ebitda income declined 13.6% to US$105.9 million.

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