Mobile Network Operators Show A Revenue Growth Trend But It’s Not That Simple…

If anyone would be happy about the 4th quarter Potraz report is a shareholder because the revenue in the sector has significantly improved from the last quarter. The 4th quarter of 2017 is remembered for the political transition that took place in Zimbabwe, chronic shortages of cash and highly volatile exchange rates both in the formal and informal markets. Surely, all these factors are not welcomed by all stakeholders as they affect them negatively but the telecoms sector seemed to have had it differently in the 4th quarter.

The happy investor

Investors will probably be happy with the report in terms of the revenue generated by Mobile Network Operators (MNOs). The year 2017 fared better for MNOs considering the revenue they collected in 2016. The year was marked by consistent increase in MNO’s quarterly revenue. In particular, revenue for the final quarter increased to just below $290million. This is a 15% increase compared to the previous quarter.

Since revenue is part of cashflows and cashflows are used to determine the attractiveness of an investment opportunity, the increase in revenue for the MNO’s could entice prospective investors, holding other factors constant.

Did revenue really grow though?

Yes, in nominal terms it looks like revenue grew. However we must also remember that the value of currency is not very easy to determine in Zimbabwe right now.

In the 4th quarter of 2017, the exchange rate between the real USD and the supposed USD (transfer money) in bank accounts was varying. The premium on hard currency when you had funds in your account was as high as 90% at some point. The lowest during this quarter was 50%

Applying these street economics, we can actually conclude that MNO’s had less revenue in real USD terms in the 4th quarter than in the 3rd quarter. Of course, this is not conventional accounting so let’s just leave investors to be happy about the increase in revenue.

Besides that….. other worrying figures for Investors

In the first 3 quarters, MNOs were showing a trend of reducing operating cost. However, in the 4th quarter operating costs increased by 10%. Growth in operating costs means a cut in margins for the operators. It’s not so bad though because the increase in costs was lower than the increase in top line revenue.

The issues of the value of currency could be at play here as well. In our ‘street economics’ MNOs could have actually lowered their operating costs in real USD terms.