Econet’s financial performance continues to be weighed down by misalignment between tariffs and the cost base. Year-on-year inflation closed the period under review at 285% while tariffs increased by 61% over the same period resulting in loss of value. Despite voice and data volumes increasing by 27% and 40%, respectively, these improvements were offset by sub-inflation tariffs resulting in a decline in revenue in real terms in 1H23. EBITDA also registered a decline in 1H23 compared to same period last year. The reduction in profit margin was partly attributable to low revenues due to sub-optimal tariffs coupled with cost pressures experienced under the hyperinflationary environment. As a result of the exchange rate movements over the last six months, the business recorded significant foreign exchange losses which represented 39% of revenue against a prior year comparative of 2% virtually eroding any possibility of achieving an accounting profit. Further headwinds on profitability came from the introduction of the telecommunication traffic monitoring system (TTMS) system which became fully operational on 1 May 2022. The system has placed an additional tax burden of US6cents per minute on the business on international incoming traffic, thereby increasing costs. These taxes are additional revenue taxes to those already paid by the Company prior to any allocation of revenue to cost of operations. It is anticipated that these increased taxes will result in customers opting to use alternative calling platforms that do not have similar obligations, such as WhatsApp, Telegram and other similar applications. Foreign currency scarcity persisted, negatively impacting the Group’s various network expansion and routine maintenance plans. Regardless, the Group launched the first 5G network in the country during the period under review. The Group closed 1H23 in a loss position and consequently did not declare a dividend.
