Econet spends US$66M on upgrades and grows usage, but economy is eroding service quality

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Econet Wireless, the country’s biggest telecoms operator, spent US$66 million on its network last year and grew its voice and data usage, despite Zimbabwe’s currency crisis weighing on the company’s efforts to upgrade service quality.

Customers used 58% more data on Econet than they did in the previous year, adding to the growth of 48% in the previous year. Voice usage rose by 19%, showing resilience. To meet this growing demand for usage of both voice and data, Econet invested in 80 new base stations, expanding coverage and capacity.

“The business invested US$66 million as part of its network modernisation program. Network expansion and upgrades remain imperative to support business sustainability, which has been hampered by several years of under-investment, due to ongoing macro-economic challenges,” Econet says in its full-year results just released.

Tariffs are set by the telecoms regulator, POTRAZ, which awarded the industry four increases during the year; three adjustments of 61% each and a fourth adjustment of 50% during the year. But these could not keep up with inflation, which rose to 230% in January this year.

Because of this, Econet cannot invest enough to deliver quality service, leaving customers frustrated.

“This put significant pressure on operating costs on the backdrop of grid power load shedding challenges. The prevailing tariff environment is a threat to the long-term viability of the local telecoms sector and curtails the ability of the sector to invest appropriately to meet customer demand, thereby undermining the quality of service,” Econet says.

The country’s skewed exchange rate shows its impact on Econet’s results. The company is in solid health, with usage and investment growing and cash flow positive, yet it recorded a loss because of a Z$77 billion foreign exchange loss. The loss was caused by the revaluation of its debt at the formal exchange rate.

While Econet is earning some USD from some of its services, this is not enough for all operations. With no access to forex at the auction, Econet has gone to shareholders for a rights issue to raise US$30 million to redeem debentures.