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Zim's slowdown hits Econet hard

Harare - Profitability in Zimbabwe's Econet Wireless declined 30% to $49.6m in the half year to the end of August, a development executives attributed to a slowdown in the country's economy and which had forced it to adopt newer investment strategies.

Econet is one of the strongest counters on the Zimbabwe Stock Exchange that foreign investors are interested in. It has 9 million subscribers, 3.7 million users for its EcoCash mobile money platform and also owns Steward Bank, which officials said was now turning the corner for the positive.
 
Executives at the company said on Thursday that massive growth in Zimbabwe’s mobile penetration rate to above 100% had also lead to saturation of the market. This had occasioned lower revenues from the voice telephony category, mobile telcos’ traditional cash cow.
 
“With Zimbabwe’s mobile penetration rate now above 100%, voice revenues are beginning to mature. This trend is not unique to Zimbabwe, as it is common wherever markets reach such levels of maturity,” the company said in an emailed statement.
 
This had forced it to adopt an investment strategy into non-voice services such as mobile money, data and other overlay services. Telecommunications executives in Zimbabwe have previously complained that social media and instant messaging platforms were eating into the revenue base of mobile companies.
 
However, for Econet, “non-voice services – products such as EcoCash, data services and others – now contribute 21% to Econet’s revenues”. In the half year to August 2013, non-voice revenue accounted for 10% of the company’s revenues.
 
Revenues for the interim period to the end of August grew by a marginal 4.2% to $392.3m, the company’s interim financial results showed.
 
“Although revenue growth has slowed, this is in a context of declining revenues in most other industry sectors in the economy and lower economic growth.
 
“We continue to invest in new products and services that allow for the continued growth of revenues through innovative services and this has resulted in margin pressures for the business,” James Myers, the Econet Wireless Zimbabwe group chairperson said in commentary accompanying the company’s results.
 
By the end of the period, subscribers on the company’s network had grown to 9 million from the 8.5 million announced earlier this year. Econet has now declared a 0.61 cents interim after closing the period with $94m in cash resources.

“We had anticipated the trend away from traditional income streams. We then took a strategic decision to steer the business towards innovations that would become new sources of growth for our business.

"We are beginning to see the fruits of that strategy,” Econet CEO, Douglas Mboweni said at an analyst briefing on Thursday afternoon.

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