Econet faces foreign supplier payments headache

LISTED telecoms giant, Econet Wireless Zimbabwe says its ability to pay foreign suppliers and be in a position to modernise and embark on an expansion drive to meet changing customer needs is being curtailed by constraints in accessing foreign currency.

The leading telecommunication firm is on a path towards being a fully-fledged digital service provider (DSP) in line with changing customer needs and innovation as one of its core operating imperatives.

However, in a trading update for the third quarter that ended 31 December 2022, Econet said in order to improve the quality of service, it plans to modernise the current core network to one that is virtualised, which requires enhanced access to forex resources.

The modernisation of the current know-your-client (KYC) system is also underway in line with our DSP strategy.

"This will include biometric detection as well as digital identification, leading to better protection for our customers against growing cyber-security risks," it said.

However, foreign currency challenges are stalling expansion efforts.

"Although the business continued to witness an increase in demand for its services, foreign currency availability for servicing our foreign suppliers has continued to be a major challenge and has hampered our ability to implement much-needed network maintenance expansion," said Econet.

The company noted that overall, the local telecommunications industry has been struggling to meet the capacity and coverage demands of consumers as investment is long overdue.

It said capacity enhancements and routine maintenance has remained severely constrained by the lack of access to foreign currency mainly to service foreign network suppliers.

However, it noted that it continues to engage and negotiate payment terms with network equipment vendors to secure their continued support.

In view of electricity challenges facing the country and the entire region, Econet said it continues to invest in alternative power solutions in a bid to ensure network availability.

However, it said solar and battery storage solutions require significant foreign currency investment.

"The pace of investment has remained below desired levels, thereby impacting service quality. The business has also had to continue using diesel engine generators in the face of sharp declines in available grid power," it said.

On tariffs, the telecommunications firm said during the third and fourth quarter the regulator, Potraz, authorised two separate tariff increases of 61 percent in September and November to align operating costs with the current inflationary operating environment.

These still remain below the inflation rate in the economy, said Econet, adding that the prevailing tariffs remain below regional benchmarks hence underinvestment in the sector.

"We will continue to press for tariff revisions that maintain the real value of our service offerings," it said.

On financial performance, inflation-adjusted revenue for the nine-month period grew by nine percent compared to the same period last year.

The growth was largely driven by voice and data volumes, which were however weighed down by below-inflation tariffs.

The company said it was experiencing growth in the proportion of US dollar-denominated sales to local customers and has observed that other consumer businesses are now selling more than 60 percent of their products and services in US dollars.

If the trend continues, Econet says it expects this to ease challenges in terms of paying key suppliers.