Econet (ECO.zw) Profits Trippled From $36.2m to $132.3m … But How is it Possible?

Certainly the future looks bright for Econet Wireless Zimbabwe Limited (ECO.zw), as far as figures are concerned. Econet (ECO.zw) is listed on the Zimbabwe Stock Exchange and it recently released its 2017 annual report. And for more information about Econet Wireless Zimbabwe Limited (ECO.zw) and a full library of results, reports and presentations please visit the company page. Econet’s profit after tax rose from $36.2m to $132.3 million; a quite-surprising growth of 265%. That’s 3.6X growth right there and please take note that’s mere profit not revenue.

Econet (ECO.zw) profits trippled from a shallow $36.2m to a whooping $132.3m … but how is it possible? Obviously, there are a few factors we are going to point to that effect which also attributed to such huge profits, despite the business operating in a challenging economic and operating environment. Certainly, the company’s revenue and profit is looming due to growing contribution of non-voice products as the company’s converged TMT (Telecoms, Media and Technology) model begins to reap dividends.

The Company’s Business Model

Understand this – Econet’s business success is not by sheer luck or miracle, it has all to do with the implementation and execution of its business strategies prudently and diligently. The company understands positive value creation through innovation. Innovation is central to achieving sustainable business growth and enabling the transformation of livelihoods through enhanced products and services.

Strategic Pillars – The Levers Of Execution

For Econet to enable discipline and excellence in executing their strategy, they remain focused on the satisfaction of their customers, motivating people, creating life changing innovations, running lean and agile organisation, and implementing proactive risk management and sustainable stakeholder value creation to ensure achievement of strong business performance.

Just a month ago, Econet just to show how focused they are in satisfying and appreciating their customers, hosted a black-tie dinner at the Holiday Inn Bulawayo hotel – where also several customers walked away with exciting prizes from a raffle draw. Econet hosted the dinner on the sidelines of this year’s Zimbabwe International Trade Fair (ZITF) in Bulawayo, where it is a business exhibitor and at whose stand the country’s Vice President, Rtd General Constatino Chiwenga paid a courtesy visit earlier in the week

Operating Model – Telecoms, Media & Techonology (TMT)

Econet’s operating model is built around Voice, Broadband, Fintech and Media combining different technologies and platforms to offer unparalleled choice, value, access and convenience to customers across different industries. The business is now a fully established TMT, player that is ensuring transformation and inclusion across all market segments from education, health, banking, Fintech and media among others.

Chief Executive Officer, Douglas Mboweni last year once attributed the strong performance to continued innovation within the business with non-voice products increasing their contribution.

“Our focus is to use technology to transform, in a deep, meaningful and fundamental way, how our customers transact and do business, and to provide convenience through technology,” said Mr Mboweni.

“In line with our TMT strategy, we recently launched Kwesé TV in Zimbabwe, in partnership with Econet Media Limited. We are encouraged by the employment opportunities and new skills that have been created in our country as a result,” Mr Mboweni said.

“Going into the future, we will continue to strive to deliver more value to our customers through tailor-made product offers, as well as market segmentation and product bundling across all the three pillars of our TMT model. In view of the current cash shortages, and the growing use of digital financial transactions, our solutions are now a preferred mode of transacting, and we are working on further scaling up our mobile transacting and banking systems to accommodate increased demand,” said Mr Mboweni.

Commenting on the side, Econet Wireless Zimbabwe’s Finance Director Roy Chimanikire also reiterated that:

“Our results demonstrate diligent execution of our strategy. Our key message has been that we are growing the non-voice elements of our business. The trends that we are seeing are very encouraging. As we continue to evolve into a fully converged TMT business, we see our business changing in the depth and quality of its revenue streams and its return potential. We are well positioned to take advantage of the opportunities that are available to us in this market,” said Mr Chimanikire.

Infrastructure investment

On the infrastructure investment front, according to the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ)’s fourth quarter released by the Authority back in March this year revealed that Econet is leading in the investment of mobile base stations in which it deployed 65 base stations in Q4. In the same period Telecel deployed 31 additional base stations, while NetOne deployed a net addition of 4 base stations in the quarter. Of the 100 new base stations deployed, the report shows 50 where LTE base stations and out of the 50, Econet contributed 41 of the LTE (4G) base stations.

The report showed that by ratio, Econet’s 3G mobile data infrastructure investment now sits at 57%, compared to NetOne’s 28% and Telecel’s 15%. It also reveals that Econet is way ahead in LTE infrastructure investment, with the mobile operator now sitting on 68% market share of LTE base stations. NetOne has 31% while Telecel trails on 1%.

Value Creation Through Financial Inclusion

Steward Bank

Steward Bank’s is a wholly owned subsidiary of Econet Wireless Zimbabwe. It’s core purpose and strategic goal is to foster financial inclusion through innovation, making banking cost-effective, universal and accessible to every Zimbabwean. The Bank has significantly grown due to its bold strategy to pursue a digital banking model anchored on transactional banking and a seamless integration with the EcoCash mobile money platform as a central pillar.

In line with Steward Bank’s mission to offer affordable financial services to every Zimbabwean, and propelled by a strong brand, over 120 000 new customers signed on for Steward Bank’s products and services in the past six months, as testimony to how far the Bank’s financial inclusion agenda has grown.

We are all aware of the fact that when the cash crisis was at its peak, (some may argue that it still is), remember that the majority of banks were not opening accounts because they simply did not have money to give to customers. Guess what? Steward defied all odds, it kept opening accounts. Now, due to the cash crisis and the bad economy generally, banks are making money out of transaction fees and not lending. This means that whoever has the most customers also earns more, thus simple math.

Steward bank is now the largest bank in Zimbabwe by customer numbers at 600,000 which is an equivalent of 28% of Zimbabwe’s total banker population.

Revolutionary & Award-Winning Mobile Money Solution – EcoCash

EcoCash is an innovative and secure mobile payment solution that enables customers to complete simple financial transactions. To date EcoCash is integrated with over 90% of banks countrywide enabling customers to enjoy the convenience of moving money from their bank accounts into their EcoCash wallets and vice versa. EcoCash has empowered people in the most remote areas of the country to have access to the financial system, improving their cash flow management and ultimately, their livelihoods. It has been able to assist the Central Bank to monitor remittances in the informal markets and achieve financial inclusion.

Many may understand the revolutionary part but may forget the award-winning part, so will jog your memories. EcoCash was awarded best mobile money solution at the Mobile World Congress Global Mobile Awards for 2017 in Barcelona, Spain, with EcoCash Saving Clubs recently scooping an award too. Done with the explanations. Remember Zimbabwe is currently facing a cash crisis affecting scores of bank account holders. The mass adoption of EcoCash, the mobile money solution, has resulted in increased financial inclusion, consequently creating value for the economy and community.

Due to this cash crisis, Zimbabwe unexpectedly became a digital economy and the service which was most ready for this digital economy was EcoCash. Their subscriber base grew exponentially and because they had already established a ridiculously wide agent and merchant network they could stand toe-to-toe against the banks when physical money became scarce.

EcoCash also directly drove the subscriber growth because once the cash issues started escalating, NetOne and Telecel subscribers had to buy an Econet line so that it would be easier to send money to their friends and relatives since everyone seemed to be on EcoCash. EcoCash also had a larger number (by far) of merchants when compared to Telecash and OneWallet (now OneMoney).

Of course now, subscribers don’t need to leave the rival networks to register for EcoCash as long as they have a smartphone and data to access the EcoCash app.

Subscriber boom

Econet’s subscriber base rose from 10.3 million – 11.4 million subscribers which is a leap of 1.1 million new subscribers. Econet gets revenue from these subscribers through multiple channels such as voice, data, SMS, and the EcoCash. Then there is also the addition of the mobile insurance service EcoSure – the fastest growing potfolio within the group which is also immensely contributing to the company’s revenue and growth. EcoSure now with over 2 million insured users, will over time grow into Cassava’s biggest services. 

The introduction of new products and services also helps to keep the ship onshore, taking for instance the recent introduction of Kwese iflix.

In a nutshell, Econet’s robust business model, built on the pillars of Telecommunications, Media and Technology (“TMT”), is its competitive edge, therefore, despite a challenging economic and operating environment, their innovations, effective market segmentation and solid infrastructure, have enabled them to maintain a leading position in the market. The strong focus on revenue diversification, stringent cost management as well as developing a corporate culture of disciplined execution and accountability has helped the company to limit both a revenue and margin decline, while continuing to maintain a customer centric focus.