#MondayBlues: Econet Blames Potraz and Gvt For Poor Annual Financial Results

Zimbabwe’s telecommunications sector is considered one of the most lucrative industries in Southern Africa but philosophers say whenever one discovers a diamond field, expect blood wars to rage on until the diamond deposits have run dry. The same diamond story can be likened to the Econet versus Potraz debacles witnessed up to date.

By Sting 

Econet Wireless Zimbabwe is currently the  largest mobile network operator in the country, an organization whose success story is not written on comfort grounds after walking a long narrow road coupled by series of court battles since its birth in the early months of 1998. However, the most humbling testimony of the Strive Masiyiwa founded business entity is how the company has rose to become the leading game changer coupled with clashes against its regulator, POTRAZ and the government.

In its recent financial statements, Econet attached a value analysis revealing the interference that it has encountered from the industry regulator POTRAZ and the government.

Econet Wirelesses thinly Telecoms operator, who was demanded to pay a chunk of the $137.5million licence fee which they did when the other two operators were still basking in the glory of term not yet expired.

Despite Econet being the largest tax payer in the industry up to date and also considering the investments made by the company and the countless lives the organization has changed despite the continuous clashes with the authorities its regulators Econet would’ve deserved a pat on the back fro supporting the sector.

During an analysis of the statement accompanying the telecoms operator’s consolidated annual financial results, Econet’s chairman Dr. J Meyers highlighted how the regulatory directive to reduce tariffs as well as the 5% tax added to all airtime prejudiced the operator of $95 million and $30 million respectively.

We estimate that the adverse impact of the tariff reduction on the full year revenues was about US$ 95 million. Contrary to normal practice, where excise duties are levied on the customer, the excise duty on airtime, was levied on the Company. This position was, however, reversed on 1 January 2016, and the Company was allowed to levy the duty on its customers. The excise duty levied on the Company resulted in a revenue reduction of US$ 30 million, for the year under review.

POTRAZ’s reduction of interconnection fees from 5 cents to 4 cents per minute was also identified as a cause for reduced revenues, depriving Econet of $4.5 million while the increase in contributions to the Universal Services Fund (USF) from o.5% to 1.5% of revenue was also cited as additional $0.8 million in costs.

Econet has also calculated the costs associated with de-registering subscribers who aren’t compliant with KYC regulations, placing the value of lost revenue from these subscribers at $2 million and the cost of re-registering them at $500.000

All this comes to $132.8 million in deprived revenues…. Read the Econet Chair’s statement

Ever since POTRAZ, the Zimbabwean telecoms regulator issued a directive to mobile operators to reduce their voice tariffs there have been complaints from operators that this move would accelerate the decline of their revenues.

To add more salt to Econet’s bleeding wounds, POTRAZ recently went on ban several promotions ran by the operator and several others from its competitors like NetOne and Telecel. For some reason which the operator did not give satisfactory answers, Econet and its counterparts are losing revenue in an already ailing economy.

The loudest criticism of this move was from Econet Wireless and the operator went on to file a lawsuit against POTRAZ at the beginning of the year for $132 million citing the lost revenue and calling for clarity on the Universal Services Fund.

With the telecoms industry facing other challenges such as shifting usage trends and a tough economic environment, the directives issued by the regulator have been cited by all three mobile operators as contributory factors in the reduction of revenues.

As much as these might be genuine concerns, the regulator, and the government haven’t shown any signs that they will be making any concessions especially since some of these changes like the 5% levy on airtime were meant to increase revenues for the state.

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