ECONET Wireless Zimbabwe’s half year results to August 31 show that its patient investment in data is starting to bear fruit, despite the increasingly difficult operating environment.
Revenue went up 17 percent to $353 million, while EBITDA increased by 31 percent to $139 million. Profit went up 226 percent to $49 million on the back of increased revenue from all income streams voice, data and financial services — and reduced finance costs, which went down by $10 million.
Data revenue grew 9 percent to $63 million during the period under review, spurred by the company’s growing 3G data network, efficient utilisation of its LTE (4G) network and the ever-growing smartphone penetration.
Mobile money service EcoCash’s revenues rose by 45 percent, to $57,1 million, while banking services revenue went up 97 percent to $28,4 million, confirming Econet’s transformation into a Telecommunications, Media and Technology (TMT) company.
This is borne out by evidence; revenue from data, financial services and other non-voice products, at 63 percent, made up nearly two thirds of Econet’s total revenue.
The company’s share price was early this week trading at about 184 cents per share, an 52-week high, further demonstrating — among other things factors — that the results have been well-received by stock market investors.
The results attract interest because of Econet’s blue-chip status and the fact that the company is the market leader in the local ICT industry, controlling more than 50 percent of the mobile customer market share, and more significantly, handling 80,1 percent of all mobile voice traffic, 75,4 percent of mobile data traffic, and turning over 78 percent of the mobile revenue market share, as of the end of July 2017, according to industry figures.
It is also significant that Econet is part of a global industry at the sharp end of disruptive, technology-driven change that has a far-reaching impact on business and finance — especially with the advent and growth of mobile financial services and the digitisation of traditional financial services.
And so, with a stellar performance chalked up in a difficult, turbulent business environment, can the results offer any insights to other blue-chip companies operating in the same environment or, could other players in the industry pick out any clues from the Econet half year performance?
A closer look at the numbers shows the recent performance is the culmination of several strategic initiatives, investments and interventions that Econet made over the past five to 10 years.
Key among these has been Econet’s early decision to extensively invest in its data network infrastructure (the company launched full broadband in 2010) and to continue the investment, with an ongoing upgrade announced early this year, where the company is replacing all its 2G sites with 3G technology and so making the Econet network a 100 percent 3G and LTE network, a truly mobile data network. The company has deployed about 500 LTE sites, over 64 percent of total LTE investment in the country.
The huge investment in data over time, and the increasing penetration of smart phones, explains Econet’s growing data revenues, driven by its steadily increasing data traffic, which translates to a dominant data traffic market share.
Yet, while data coverage and quality, and data infrastructure investment have given Econet a significant competitive advantage, it seems the real differentiator for Econet’s sustained performance going forward will be the multimedia content that Econet carries through the data infrastructure.
This is where its TMT model fits into what has been a long game for Econet. It also explains why the introduction of Kwese is important to Econet’s strategy going forward, as the video streaming and usage opportunities it brings will further sweat the company’s data infrastructure assets.
At a broadband conference in July, Econet chief operating officer Fayaz King said the company was positioned to not only take advantage of current data opportunities, but to “disrupt itself by continuously innovating”.
King said at the time, Econet was not afraid of OTTs (Over The Top content and media players) that often ride on mobile network operators’ infrastructure, and are thought to cannibalise their revenues, because Econet itself was already disrupting itself to become one.
King’s statement referred to Kwese TV Everywhere, which the company launched a few weeks ago, and to the TMT model, which like OTTs rides on the MNOs’ infrastructure.
Econet is overlaying its own content on its own infrastructure, in much the same way OTTs and financial technology services are riding on mobile digital platforms to change the face of banking.
Econet’s ability to weather the economic storm and register a strong performance is the result of patient investment that has been in the works for a very long time, building resilience against future headwinds.
|Mobile Network Operator (MNO) Data Traffic (x 1million MB)|
|MNO Data Traffic Market Share|
Source: Potraz 2017 Second Quarter Sector Report