Econet revenue rise by 11%

Econet CEO, Douglas Mboweni

Published: 29 October 2013

Zimbabwe's telecoms giant, Econet, reported another set of mixed interim results showing solid 11% year on year topline growth but muted attributable income, down 10% year on year to $70.5m for eps of USc 4.5. Revenue growth was underpinned by a 22% jump in subscribers to 8.5m. Econet maintained its dominance, commanding 74% of the market.

The lower bottomline was due to higher net finance costs of 75.4% and a higher effective tax rate of 33.5% as margins were generally maintained.

The cellular network operations profits grew 8.4% to $83.0m while other businesses posted a loss of $12.4m. No interim dividend was declared.

Contribution of voice revenue declined to 60% from 66% as other overlay services contribution increased. Average revenue per user (ARPU) declined by 10% to approximately $8.00 from $8.90 due to the dilutive effect of lower value subscribers and new services that are still to realise their full potential. The decline in ARPUs was moderated by the 60% increase in usage per subscriber due to increased promotional activity.

EcoCash contributed 13% or $48.9m to revenue as the number of subscribers registered for EcoCash increased 76% to 3m. EcoCash handled over 50m transactions valued at approximately $1.2bn during the six months period. The number of EcoCash agents increased by 338% to over 7,000 resulting in increased EcoCash agent commission.

Econet's cost pressures emanated from network costs 7.4%, marketing 13.6%, EcoCash 11.4%, licence fees $137.5m, staff costs and customer service costs.

Finance costs grew 75.4% as the vendor financing was replaced by a syndicated loan at a weighted average rate of approximately 7.3% per year in addition to the 6% guarantee fee paid to Econet Wireless Global.

Management states that the future of the company lies in innovation and providing value added services.

Imara Edwards analyst Addmore Chakurira said they view the slow decline (-110bps) in EBITDA margin as very encouraging and indicates Econet's ability to preserve trading margins as voice ARPUs decline.

"We expect that capital expenditure to revenue will probably recede to between 15% and 20% by FY 2014 as the company focuses on sweating the existing assets. We expect Econet to generate higher cash flows from operations over the next few years," said Chakurira in a note to shareholders. Imara maintained it buy recommendation on Econet.
- businessdaily

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