Econet Wireless Zimbabwe : 2023 FY Results & Audit Report

ECONET WIRELESS ZIMBABWE LIMITED

Abridged consolidated financial statements

for the year ended

28 February 2023

DIGITAL

TRANSFORMATION

FIRST 5G MOBILE

NETWORK

RELIABLE VOICE

SERVICE

Econet Wireless Zimbabwe Limited - Abridged Consolidated Financial Results

We relentlessly offer

solutions that bridge the digital divide across the country

ECONET WIRELESS ZIMBABWE LIMITED

(Incorporated in Zimbabwe on 4 August 1998 under Company registration number 7548/98) ZSE alpha code: ECO ISIN: ZW 000 901 212 2

Registered office

Econet Park, 2 Old Mutare Road, Msasa, Harare, Zimbabwe Telephone: [phone], Fax:[phone]

E-mail: [e-mail],

Website: www.econet.co.zw

TIP-OFFS ANONYMOUS

Deloitte & Touche

Telephone:	0808 5500
Address: The Call Centre
Freepost:	P.O. Box HG 883, Highlands, Harare, Zimbabwe
E-mail:	[e-mail]

Financial highlights

Inflation adjusted

EBITDA	STATUTORY PAYMENTS

7%	256%
from ZW$ 147 billion (2022) to	from ZW$25 billion (2022) to
ZW$137 billion	ZW$ 89 billion
VOICE USAGE
19%
DATA USAGE
58%			DIGITAL
	TRANSFORMATION
				FIRST 5G MOBILE
				NETWORK
	RELIABLE
	VOICE
	SERVICE

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ECONET WIRELESS ZIMBABWE LIMITED - Abridged Consolidated Financial Results

Chairman's statement

• We are the only network certified to support Apple devices. Our 5G and network modernization rollout plan will increase access to newer technologies such as virtual, augmented, and mixed reality, ultra-high-definition video (UHD) streaming, Internet

of Things (IoT) and Artificial Intelligence (AI). "

customers to our digital ecosystem and our partner services as well. All digital ID subscribers will have greater ability to do more self-service activities on our group platforms.

As we continued to drive digitalisation and digital adoption in line with our digital service provider

Financial review

The financial review is based on inflation adjusted financial statements which are the primary financial statements. Historical cost financial statements have been presented as supplementary information. In order to comply with International Accounting Standard 29 - "Financial Reporting in

Introduction

Our business supports the growing demand for digital services in line with our strategic intent to become a fully-fledged Digital Services Provider. Digital services and next-generation connectivity have become central to people's livelihoods. As a result, globally, the telecommunications sector is increasingly leveraging on emerging technologies for hyper-connectivity, cybersecurity, cloud computing and artificial intelligence to fulfil these fast changing customer demands. Econet Wireless is not left behind in adopting these technologies to fulfil our vision of a digitally connected future that leaves no African behind.

Environment and regulatory review

secure the various network elements that are being targeted.

Operations review

In order to stay abreast of technological advancements and better serve our customers, we added twelve (12) 5G base stations during the year. We remain the only network in the country with 5G technology. We are the only network certified to support Apple devices. Our 5G and network modernization rollout plan will increase access to newer technologies such as virtual, augmented, and mixed reality, ultra-high-definition video (UHD) streaming, Internet of Things (IoT) and Artificial Intelligence (AI).

(DSP) strategy, the business continued to promote self-help and self-care platforms for the convenience of customers. We re-launched an enhanced Yamurai (WhatsApp Bot) and increased our capacity self-care and social media platforms. Our contact centre also adopted a new automatic call distribution (ACD) system, which enables us to handle more customers efficiently and effectively.

Tariffs

Charges applicable to all mobile network services provided by the business are regulated by the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) based on sector specific economic models. The business acknowledges the various interventions that the Regulator has granted the sector in a bid to align operating costs with revenue generating activities.

Hyperinflationary Economies" in the preparation of its consolidated financial statements, the Group estimated and applied inflation rates for February 2023 based on the Total Consumption Poverty Line published by ZIMSTAT. The estimation of the consumer price index is permitted by IAS 29 where a general consumer price index is not readily available. The Directors caution users of the financial statements on the usefulness of these reported financial statements, considering distortions that arise when reporting in a hyperinflationary economy.

Group revenue recorded a 20% rise driven by growth in voice and data usage of 19% and 58%, respectively. The Regulator granted the sector three tariff adjustments of 61% each and a fourth adjustment of 50% during the year. The

Providing quality services, which not only meet but exceed our customer expectations is at the core of our endeavours. Whilst concerted efforts were made to meet these standards, our efforts were continuously hampered by extensive load shedding on the national power grid. For the period under review, load shedding averaged 18 hours a day. Consequently, the business resorted to alternative sources of energy to power the network. This significantly increased our cost of providing services to our customers.

The business also experienced vandalism on our critical network infrastructure. To reduce vandalism on our network equipment, the business instituted various monitoring and deterrent measures to

To meet the growing demand for both voice and data traffic, we commissioned eighty (80) new base stations providing additional coverage and capacity. We commenced the deployment of a new modern core network with new generation cloud capabilities. As part of this network modernization effort, we also deployed state of the art data center infrastructure to ensure high availability of the network.

We have started deploying a new digital Know Your Customer (KYC) platform on a phased approach. The platform leverages on digital identification and will centralize group KYC capabilities, distribution, and other partner management services. This shared service enables convenient access for our

However, tariffs continue to fall behind inflation because of rapid changes in the macro-economic environment. This disparity occurs because tariffs for the sector are determined in the local currency, based on movements in inflation and in the exchange rates. 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.

tariff adjustments were not adequate to offset the increase in inflation which closed at 230% in January 2023. Despite the revenue increase on account of usage, the earnings before interest, taxation, depreciation, and amortization (EBITDA) margin decreased from 52% to 40% for the year under review. The disparity between the revenue growth and EBITDA margin is reflective of the sub-economic tariff environment coupled with accelerated exchange rate depreciation.

The local currency lost value by more than 85% during the year under review which had a negative impact on overall profitability. The Group incurred exchange losses of ZWL$77 billion which

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ECONET WIRELESS ZIMBABWE LIMITED - Abridged Consolidated Financial Results

Chairman's statement (continued)

translated to 23% of revenue against a prior year comparative rate of 6% of revenue.

The business invested US$66 million as part of its network modernization 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.

Debentures

Subsequent to the year end, the Company's debentures matured at the end of April 2023. The Company has been unable to secure foreign currency for the purpose of redeeming the debentures via the RBZ's foreign currency auction process. Whilst the Company does generate some foreign currency from its operations, this is being deployed to pay for essential mobile network and related technology upgrades and expansion.

Accordingly, the Company has announced a renounceable rights offer to raise US$30.3 million

of foreign currency from its existing shareholders. A circular with further particulars will follow.

Dividend declaration

The Directors resolved not to declare a dividend for the year due to the need to capitalize the network.

Corporate social investment

Our corporate social investment initiatives remain focused on three pillars, education; global health; and rural transformation and sustainable livelihoods.

Through our implementing partner, Higherlife Foundation, we also invested in improving the quality of education by providing training and capacitation programs for educators. As part of efforts to strengthen early childhood development and improve the quality of education for foundation phase learners, we provided literacy and numeracy training to more than 1 300 foundation phase educators across the ten provinces in Zimbabwe. In total, more than 3 400 educators were trained

on foundational learning methodologies, positively impacting 173 600 students.

Through the global health program, we catalyse initiatives and projects to broaden access to affordable, high-quality healthcare for Zimbabwe's most vulnerable populations. Higherlife Foundation is the implementation partner for various projects working closely with the Ministry of Health and Childcare.

Outlook

As we pursue our vision of a digitally connected future that leaves no Zimbabwean behind, we will continue to innovate in order to give a unique digital experience to our customers. The consumption of digital services is expected to continue growing. We have a strong platform to anchor our transition to a fully-fledged digital services provider. Exploiting 4G and 5G network enabled opportunities will be key to keep abreast with emerging global trends and improve service delivery.

Appreciation

On behalf of the Board, I extend my profound gratitude to our valued customers who continued to support the business through this challenging period. I would like to recognise the invaluable support that we continue to receive from our partners. I commend and thank our staff for their contribution, passion, and commitment to the business. To my fellow Board members, allow me to extend my sincere appreciation for your guidance and continued support.

Dr. J. Myers

Chairman of the Board

23 May 2023

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ECONET WIRELESS ZIMBABWE LIMITED - Abridged Consolidated Financial Results

Abridged consolidated statement of profit or loss and other comprehensive income

For the year ended 28 February 2023

		INFLATION ADJUSTED	HISTORICAL COST
All amounts in ZW$ 000	Note	2023	2022	2023	2022
Continuing operations
Revenue	6	339 167 367	282 151 779	267 286 494	67 065 626
Other income		4 007 148	562 799	4 105 623	235 114
Share of (loss) / profit of associates		(1 319 750)	219 714	200 272	309 419
Direct network and technology operating
costs		(88 708 134)	(66 770 204)	(73 348 755)	(15 727 266)
Other network costs		(22 413 729)	(15 177 711)	(18 340 302)	(3 675 802)
Costs of handsets and other accessories		(10 100 319)	(7 241 329)	(7 528 548)	(1 572 381)
Marketing and sales expenses		(7 233 774)	(4 271 224)	(5 665 219)	(1 061 701)
Impairment of trade receivables		(6 004 348)	(2 190 690)	(5 055 498)	(535 173)
Staff costs		(37 298 430)	(24 794 347)	(29 198 517)	(6 004 938)
Other expenses		(32 861 215)	(15 496 162)	(27 791 274)	(3 896 998)
Profit before interest, taxation,
depreciation, amortisation, impairment,
exchange losses and monetary
adjustment		137 234 816	146 992 625	104 664 276	35 135 900
Depreciation, amortisation and impairment of
property, plant and equipment and intangibles	7	(59 982 538)	(47 982 221)	(49 724 991)	(8 617 226)
Other impairments (increase) / reversal		(1 266 446)	573 019	(1 266 246)	363 182
Exchange losses		(77 153 920)	(16 365 692)	(51 939 144)	(4 211 362)
Monetary adjustment		9 354 199	(12 029 486)	-	-
Finance income		5 511 148	2 342 295	4 088 301	583 555
Finance costs		(7 505 169)	(2 825 913)	(6 677 448)	(674 833)
Profit / (loss) before tax from continuing
operations		6 192 090	70 704 627	(855 252)	22 579 216
Income tax expense		(23 190 044)	(29 923 915)	(10 456 965)	(6 900 970)
(Loss) / profit for the year from
continuing operations		(16 997 954)	40 780 712	(11 312 217)	15 678 246
(Loss) / profit after tax from discontinued
operations	8	-	(1 152 859)	-	13 208
(Loss) / profit for the year		(16 997 954)	39 627 853	(11 312 217)	15 691 454
(Loss) / profit for the year attributable to
Equity holders of the Company		(16 684 879)	40 100 046	(11 444 409)	15 676 076
Non-controlling interest		(313 075)	(472 193)	132 192	15 378
		(16 997 954)	39 627 853	(11 312 217)	15 691 454
Other comprehensive income / (loss)
Items that will not be reclassified subsequently to
profit or loss
Fair value gain on investments in equity
instruments designated at fair value through
other comprehensive income, net of tax		38 237 749	6 482 798	114 717 464	12 659 660
Gain / (loss) on property revaluation, net of
tax		185 249 841	(10 274 865)	237 677 106	6 573 045
Share of other comprehensive income of
associates		4 604 427	1 180 226	6 695 350	741 243
		228 092 017	(2 611 841)	359 089 920	19 973 948

		INFLATION ADJUSTED	HISTORICAL COST
All amounts in ZW$ 000	Note	2023	2022	2023	2022
Other comprehensive income / (loss)
attributable to
Equity holders of the Company		228 086 796	(2 611 841)	359 073 174	19 973 948
Non-controlling interest		5 221	-	16 746	-
		228 092 017	(2 611 841)	359 089 920	19 973 948
Total profit or loss for the year and other
comprehensive income / (loss) attributable to
Equity holders of the Company		211 401 917	37 488 205	347 628 765	35 650 024
Non-controlling interest		(307 854)	(472 193)	148 938	15 378
		211 094 063	37 016 012	347 777 703	35 665 402
Earnings per share	10
From continuing and discontinued operations
Basic earnings per share (dollars)		(7.01)	16.58	(4.81)	6.49
Diluted earnings per share (dollars)		(7.01)	16.58	(4.81)	6.49
From continuing operations
Basic earnings per share (dollars)		(7.01)	17.06	(4.81)	6.48
Diluted earnings per share (dollars)		(7.01)	17.06	(4.81)	6.48

IAS 29 discourages the publication of historical cost results as the inflation adjusted results are the primary financial results. However, the historical cost results are included as supplementary information to meet other user requirements. As a result, the auditors have not expressed an opinion on this historical cost information.

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