Econet Q1 traffic declines

By Staff reporter | 09 Jun 2020 at 18:25hrs
Listed telecoms giant, Econet, recorded a drop in traffic across segments during the first quarter as consumers' disposable incomes continued to decline. In a trading update, Econet indicated that voice traffic went down 5,4 percent compared to the same period in the prior year.

Recent trends show that voice traffic across the sector has been going down as the market adopts social media voice services such as WhatsApp, Skype and Facebook voice and video calls that are relatively cheaper.

During the quarter under review, data and SMS traffic also fell by 15,6 percent and 6,2 percent respectively on year-on-year basis.  As a result, this had a knock effect on revenue. According to the firm, voice and data services constitute over 80 percent of the company's revenue base. However, there has been an increase in data traffic but not enough to offset the overall declines recorded.

The increase in data usage was a result of more people turning to e-commerce as companies implemented lockdown and social distancing as part of efforts to limit the spread of the Covid-19 pandemic.

"Although, data traffic has been increasing since the start of the national lockdown due to more people working from home, making use of digital video conferencing channels increased e-learning activity as well as the increased social media activity generated by the Covid-19 pandemic, the increase was not sufficient to offset the overall decline in the real revenues caused by the lockdown as well as the declining economic fundamentals," said Econet.

During the period under review there was a general decline in economic activity across sectors and depressed demand as consumers battled waking disposable incomes. The telecoms giant has also bemoaned the tariff regime, which lags behind the inflation.

Said Econet: "The hyper-inflationary environment and currency depreciation have depressed the real tariffs and significantly impacted operating costs and foreign exchange losses. "The company together with the other players in the industry continues to engage with the regulator to implement tariffs that sustain the viability of the sector as well as ensure that a high quality of service standard is maintained."

Apart from the telecoms sector, exchange rate distortions have also added to industry-wide woes as the cost of goods and services have been increasing in line with market trends. But, the frequency and responsiveness to market changes by relevant authorities have been low and slow, resulting in real tariffs being severely undermined.

"This means that we are not able to pay our vendors for software licences and certain upgrades required to increase our capacity and maintain the quality of service that our customers have come to expect from us," said Econet.

The group is, however, targeting to reduce operating expenditure by 20 percent as part of its survival strategies. This comes as the challenging operating environment characterised by depressed demand, foreign currency shortages and inflationary pressures is expected to continue.

Management is also focusing on cost containment and cash flow management among other key focus areas for the company to navigate the crisis. In addition to that, the company will also continue to prioritise the deployment of solar equipment and hybrid batteries across base stations and switching centres as power and fuel supply challenges are likely to continue.



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