Econet Wireless Zimbabwe says it can leverage on its stake in Liquid Telecommunications Holdings (LTH), to secure foreign currency to meet its debts.
The telecommunications group’s foreign debt obligations relate to vendor credit, which is secured against the equipment provided by the vendors.
Broadly, the telecommunications sector relies heavily on foreign currency resources for operations, network expansion, upgrades and maintenance.
In its latest trading update, Econet said it can leverage on its stake in LTH to secure foreign currency if needed.
LTH is listed on the Dublin Stock Exchange, which means it has direct access to the international capital market.
“The company continues to engage meaningfully with its vendors who have been very supportive of the business based on the relationships with these vendors spanning over 20 years.
“Where necessary, payment arrangements have been made to allow the company to meet its ongoing obligations on a sustainable basis, without disrupting business operations,” said Econet.
“The company holds an investment in Liquid Telecommunications (Jersey) Limited, which is valued at over US$ 135 million. Liquid Telecom owns and operates Africa’s largest cross border fibre network spanning over 73 000km from Cape Town to Cairo.
“Through its subsidiary, Africa Data Centres, Liquid Telecom is also Africa’s largest data centre operator. Our investment in Liquid Telecom is valued in US dollars at a level higher than our foreign currency obligations.”
In 2018, Econet moved to sell its local holding in Liquid Telecommunications Zimbabwe in exchange for shares in LTH (a foreign company) to “shore up its balance sheet in anticipation of the expected deterioration of the (local) currency.”
Meanwhile, in the half year to August 31, 2020 the group posted gains in data, voice and SMS volumes, benefitting from increased demand due to Covid-19.
The firm says it recorded gains across voice, data and SMS metrics during the six months to August 31, 2020 as demand for such services spiked due to the pandemic.
According to management, voice traffic increased by 7,9 percent, while data consumption was up by 63 percent. And SMS traffic was up 41,6 percent.
“In first half of the current financial year, all volume metrics of the business increased as prices were not adjusted in line with inflation, therefore our services were perceived by our customers to be cheaper relative to other price escalations in the economy.
“This resulted in a significant increase in usage during this period. Despite the recent price adjustments to more reasonable tariffs, the company has been able to sustain its volumes at the higher prices,” said the group.
“Our products and services have been critical in providing the much needed connectivity as our customers observed physical distancing protocols required under the prevailing Covid-19 environment.”
Econet expects its business to improve going forward following the easing of lockdown restrictions.
The operating margins of the company remain positive at about 40 percent EBITDA.
Econet is in one of the few sectors that are strategically poised to benefit from the current global health crisis. And going forward, the group said it is looking to jump on any emerging opportunities.