The “smartphone network” recently published its half year results for the period January to June 2017. According to the summary of their profit and loss statement published on SENS announcement dated 2 October 2017, the network’s revenue at half year was 5.79% lower than the previous year. Gross profit was marginally lower at 0.32% with profit before tax increasing by 3.65%. However, due to a higher tax bill during the period under review, the profit after tax was 14.7% lower this year. In addition, the company also saw a sharp reduction in exchange and finance costs of up to 78%.
The mobile industry in Zambia has seen a surge in subscribers with uptake up to 12.4 million. This represents a penetration rate north of 70% of the population. Airtel currently enjoys a customer base of 4.91 million which represents a 39% slice of the mobile cake. However, Airtel admit that competitive forces have cut down their revenues by as much as 5.79%. In addition, they blame this on “some value destruction”. Details of what the “some” is will soon be unearthed. Conversely, there is also the small matter of the 4th mobile license being awarded by ZICTA which will make the competitive landscape even more interesting.
An assessment of the balance sheet shows a reduction in property plant and equipment. However, on assets it’s the intangibles that have seen a notable increase from last year. Without the notes to the accounts, it is difficult to say what fueled this increase. However, if intangibles is the word, it may have something to do with Zikomo Kwa Million (their love market strategy) which has been building brand loyalty for the company.
In terms of liquidity, the firm continues to be able to cover its short term obligations by almost 2 to 1 in terms of current assets to current liabilities. However, in terms of non-current asset turnover, there has been marginal improvement. There is further evidence of this from the lower net cash generated from operations.
The company was also bearish in terms of investing activities. At half year, net cash used for investing activities reduced from K207m to K140m. On the back of the firm selling off its towers 2 years ago, this reduction signals a management team that is keeping an eye on its costs and as a result CAPEX is heading south. However, with the announcement of the 4 mobile license, it will be interesting whether the firm will stay the course.