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Econet 2009 annual report

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Econet 2009 annual report

Econet 2009 annual report


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  • 1. ANNUAL REPORT 2009 Expanding the frontiers of communication
  • 2. Enlarge the place of your tent, stretch your tentcurtains wide, do not hold back; lengthenyour cords, strengthen your stakes.Isaiah 54 v 2 (NIV)
  • 3. Expanding the frontiers of communicationWe are working relentlessly to achieve sustainable growththrough innovation and network expansion. We are committedto extend the frontiers of communication through thedeployment of relevant technologies such as GPRS, 3G, Wi-Fi andWi-Max. We believe that the accelerated growth programme willunlock value to all our stakeholders and open new horizons forour customers. Econet Wireless Holdings Limited Annual Report 2009 1
  • 4. Contents Econet Today Financial Highlights 3 Organisational Vision 5 Board of Directors 6 Econet Corporate Profile 8 Chairmans Statement to the Shareholders 10 Chief Executive Officer’s Operations Review 12 Corporate Social Investment 15 Directors’ Report 16 Directors’ Responsibility for Financial Reporting 17 Corporate Governance 18 Certificate by Company Secretary 22 Report of the Independent Auditors 23 Financial Statements 26 Supplementary Information 62 Detachable Proxy Form for Annual General MeetingEconet Wireless Holdings Limited Annual Report 2009 2
  • 5. Financial HighlightsSUMMARY (ZW$) 2009TRADING RESULTSTotal Revenue-Cellular Network Operations 803 421 944-Other Services 21 880 243Operating profit 126 071 889Loss before taxation (1 727 210 752)Loss attributable to shareholders (1 080 524 533)Cash utilised in operations (1 854 416 671)Capital Expenditure (34 195 449)Share performanceBasic loss per share (ZW$) (6 434)Headline loss per share (ZW$) (31 544)Market price per share 28 February 2009 (US cents) 80Number of shares in issue at 28 February 169 095 983Market capitalisation (US$) 135 276 786RatiosReturn on shareholders’ equity (2008-18.6%) (20%)Shareholders’ equity 5 491 763 214Debt to shareholders equity (2008-0%) 40%Operating statisticsConnected capacity 1 200 000Average minutes of use per subsciber (MOU) 98Average revenue per user (ARPU) US$ 8.69 subscribers Subscribers (thousands) 1 2001 200 000 654 640Connected Capacity 450 250 2005 2006 2007 2008 2009 Econet welcomes the dollarisation of the tariff regime with effect from January 2009. The charging of telecoms products and services in USD will ensure industry viability and increased foreign currency generating capacity for the nation, bringing about stability and predictability to the industry. Econet Wireless Holdings Limited Annual Report 2009 3
  • 6. We owe our success to our customers because they havefuelled our growth. We strive to understand their needs andfind ways of delighting them in every single experience. As weexpand the frontiers of communication, we will continue to delightour customers with relevant consumer innovations such as mobileinternet and mobile email. Econet Wireless Holdings Limited Annual Report 2009 4
  • 7. Organisational VisionOur VisionTo provide telecommunications to all the people of Zimbabwe.Our MissionTo serve Zimbabwe by pioneering, developing and sustaining reliable,efficient and high-quality telecommunications of uncompromisingworld-class standards and ethics.OUR VALUES Personal Internally we will always remember that we are a companyThe values we hold in common are: made up of individuals. These people are the Company. Each one is an intrinsically valuable member of the organisation,Pioneering irrespective of their gender, race or position. We will alwaysWe are a company committed to finding the best way show concern for each other in an atmosphere that is openforward in the fast moving and highly competitive and stimulates personal development, job satisfaction and atechnological field. To remain leaders in the field, we shall sense of responsibility. We believe in working in teams, inrelentlessly pursue innovative solutions and constantly grow effective and confident co-operation, in environments whereour knowledge base, with an uncompromising passion for honest praise, constructive criticism and fair reward haveexcellence. their place. Each one is an intrinsically valuable member.Professionalism Who we are inside the Company shall reflect who we areIn everything we do, both within Econet and in the externally. Our relationship with our customers will enthusecommunity, we always work in a customer and objective- with warmth and a genuine desire to meet their needs. Weoriented manner with clearly defined goals, in terms of will reach out to customers in a holistic and organic way thatquality of service. In all our professional areas and at all levels, makes them true stakeholders in Econet Wireless.we will carry out our duties skillfully and diligently. Econet Wireless Holdings Limited Annual Report 2009 5
  • 8. Board of DirectorsAs at 28 February 2009T. Nyambirai S. T. Masiyiwa C. FitzgeraldChairman Group Chief Executive Officer Non-ExecutiveMr Nyambirai is the founder and Mr Masiyiwa spearheaded the Mr Fitzgerald joined Econet WirelessGroup Chief Executive Officer of TN formation of Econet Wireless International from a position ofFinancial Services, TN Asset (Private) Limited, Zimbabwe’s finance director at one of the largestManagement and TN Bank Limited. largest mobile network operator. farming inputs businesses in Zimbabwe.T.P. Mpofu (Mrs) D. Mboweni K.V. ChirairoNon-Executive Chief Executive Officer Finance DirectorMrs Mpofu joined Econet in February Mr Mboweni joined Econet Wireless Mr Chirairo joined Econet Wireless2001 as Finance Director from Coca- in 1996. He was a key member of the as Chief Accountant on 1 June 1998.Cola Central Africa. pioneering team that launched the Mascom Wireless network in Botswana and Econet Wireless Nigeria (EWN). Econet Wireless Holdings Limited Annual Report 2009 6
  • 9. Board of DirectorsAs at 28 February 2009Z. M. T. Wazara J. G. B. Pattison P.J. CampbellNon-Executive Executive Non-ExecutiveMr Wazara joined Econet Mr Pattison joined Econet in June Mr Campbell was appointed to theWireless in December 1996 and 1998, with a wealth of experience in Econet Board on 31 January 2001.became heavily involved in all the GSM cellular.business planning activities.R. Chidembo A. N. H. EastwoodNon-Executive Non-ExecutiveMr Chidembo joined Econet in Mr Eastwood was appointed to theFebruary 2000 and brought to the Econet Board on 31 January 2001.management team a wealth of bothlocal and international experience. Econet Wireless Holdings Limited Annual Report 2009 7
  • 10. Econet Corporate ProfileECONET WIRELESS HOLDINGS LIMITED Data Control and Systems (1996) (Private) Limited T/A EcowebEconet Wireless Holdings Limited (EWHL) is the holding Ecoweb is the largest internet service provider in Zimbabwe,company of businesses involved in cellular operations, offering broadband and dial-up services to both corporate andprovision of internet access and transaction processing individual customers. It has a presence in all the major cities andservices. The Group has an investment subsidiary, EEW towns in the country.Capital Holdings (Private) Limited, which holds interests in anumber of non-telecommunications companies. EWHL, Transaction Payment Solutions (Private) Limitedwhich is listed on the Zimbabwe Stock Exchange (ZSE), is The company is a leading provider of financial transactionZimbabwes leading technology company. It is one of the switching , point of sale and value-added services, that exploitlargest quoted companies in terms of market capitalisation, the convergence of banking, information technology andand directly and indirectly employs in excess of 1 500 staff. telecommunications. The company provides local and international financial institutions and telecommunicationsSUBSIDIARIES operators access to cutting-edge technology to enhance customer service, in partnership with one of the worlds leadingEconet Wireless (Private) Limited manufacturers of smart card-based point-of-sale systems.Econet Wireless (Private) Limited is EWHLs cellular networkoperator in Zimbabwe, with a subscriber base of 1 200 000 as ASSOCIATESat 28 February 2009. Demand remains strong, with excellentprospects for continued growth. Africa First ReNaissance (AFRE) Corporation Limited EWHL, through EW Capital Holdings (Private) Limited, is theEW Capital Holdings Limited second largest shareholder in Africa First Renaissance (AFRE)EW Capital Holdings (Private) Limited is EWHLs investment Corporation Limited, with 21.66% of the listed diversifiedvehicle through which the Group holds a variety of Zimbabwean insurance and financial services group.investments, carefully selected with the twin objectives ofgrowing earnings and preserving value for shareholders.Pentamed Investments (Private) LimitedEWHL through wholly owned Pentamed Investments (Private)Limited, acquired 66% of Mutare Bottling Company (Private)Limited in November 2007.Econet will continue to expand the frontiersof communication through relevant consumerinnovations. The launch of GPRS to post-paid customersand a successful 3G trial run is a clear commitment towardsmeeting evolving customer needs. Econet Wireless Holdings Limited Annual Report 2009 8
  • 11. The business will continue innovating to meet the evolving needs of our customers; hence the investment in new technologies such as GPRS, 3G, Wi-Fi and Wi-Max. With our inspired brands, we foresee a bright future. We are moving ahead with renewed vigour and refreshed confidence, to open new frontiers of communication.Econet Wireless Holdings Limited Annual Report 2009 9
  • 12. Chairman’s Statement to the Shareholders I am pleased to present the Group’s audited financial results for the year ended 28 February 2009. Econet Wireless Holdings Limited has maintained its position as a leading provider of telecommunications services in Zimbabwe. OPERATIONS REVIEW The Group maintained its vision of ensuring the provision of telecommunications to all the people in Zimbabwe by increasing connected capacity to 1.2 million subscribers. The network rollout in Matabeleland and Bulawayo was successfully implemented after the commissioning of new equipment. A launch of data services (GPRS) was implemented and the Company is now in advanced stages of rolling out 3G services. FINANCIAL PERFORMANCE Group results include financial performance of Mutare Bottling Company (Private) Limited, a subsidiary, and Africa First ReNaissance (AFRE) Corporation Limited, an associate company. The fair value gain that had continued to anchor the performance of the business was significantly reduced inTAWANDA NYAMBIRAI the year under review, marking the return of the Group to its core business. The dollarisation of the economy ushered inChairman of the Board real revenue streams from operations, thereby enhancing business viability. Revenue Revenue for the year was US$87.9 million. Turnover remained subdued for the first ten months of the financial year due to“The Group maintained its vision controlled tariffs. However, the last two months of January and February recorded an improvement in revenues,of ensuring the provision of following the approval of a United States dollar- based tariff.telecommunications to all the Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA)people in Zimbabwe by increasing The EBITDA closed the period under review at US$26.6 million. Group performance was, however, negatively affected by theconnected capacity to 1.2 million first ten months when inflation reached astronomical heights. Loss per sharesubscribers.” The Groups basic loss per share was US$0,01. Limitations on financial reporting The Zimbabwe economic environment has created extraordinary challenges to financial reporting, as acknowledged by the Public Accountants and Auditors Board (PAAB), the Zimbabwe Accounting Practices Board (ZAPB) and the Zimbabwe Stock Exchange (ZSE). Accordingly, the Econet Wireless Holdings Limited Annual Report 2009 10
  • 13. Highlights Connected capacity Profit before tax (US$) 1,2 million US$3,1million Revenue Loss per share US$87,9 million US$0,01auditors report on the Group’s financial statements will be network, have made the prospects for the Group brighter thanan adverse opinion, a situation that has affected all quoted before.counters in Zimbabwe.CORPORATE SOCIAL INVESTMENT APPRECIATIONIn line with the Groups broad objective of participating in I would like to express my sincere appreciation to my fellowthe community through the “Econet in the Community” directors for their sterling contribution during the year andprogramme, the Group assisted in curbing the cholera also pay particular tribute to our customers, suppliers, businesspandemic through provision of requisite medical services partners, management and staff, who have performedand drugs. admirably under the difficult circumstances.Capernaum TrustThe Group continues to be mindful of the plight of orphanedchildren in Zimbabwe by assisting them through payment ofschool fees and other requirements.Joshua Nkomo Scholarship FundThe fund administers a scholarship programme for the top T. Nyambiraiten academically gifted Zimbabwean students from each of Chairman of the Boardthe countrys ten provinces every year. The funds vision is to 28 July 2009become the best national scholarship agency, which inspiresand facilitates the generation of transformational leaders ofintegrity, who shall become community builders and agentsof positive transformation in Zimbabwe and the region.OUTLOOKThe introduction of the use of multiple foreign currencies inthe economy, coupled with the pegging of tariffs in realterms, the stability of prices and the drive to expand the Econet Wireless Holdings Limited Annual Report 2009 11
  • 14. Chief Executive Officer’s Operations Review OPERATING ENVIRONMENT The macroeconomic environment deteriorated throughout the year, posing serious challenges to the viability of the industry as a whole. The business environment for the period under review was characterised by hyperinflation, shortages of basic commodities, sub-economical pricing and foreign currency shortages. The introduction of multiple currencies and the authorisation to bill in foreign currency by the regulator in January 2009, helped to restore hope and viability to a distressed industry. OPERATIONS REVIEW Notwithstanding the difficulties indicated, the Group remained committed to ensuring the provision of telecommunications to all people in Zimbabwe, by increasing connected capacity to 1.2 million subscribers. Efforts to upgrade the network were implemented starting with swap outs and installation of new high capacity base stations in the two Matabeleland provinces and in Bulawayo city. Added to this, work on a new switch based in Bulawayo has already commenced. GPRS enabled dataDOUGLAS MBOWENI services were fully implemented and the Company is now progressing to roll out 3G technology to further enhance serviceChief Executive Officer on data. FINANCIAL PERFORMANCE Financial reporting in the period covered by our financial statements was significantly flawed due to the prevailingDuring the year Econet hyperinflationary environment and the resultant price distortions in our economy. These limitations have been extensively dealtexpanded its network capacity to with in media statements made by the Public Accountants and Auditors Board (PAAB), the Zimbabwe Accounting Practices1,2 million subscribers in order Board (ZAPB) and the Zimbabwe Stock Exchange (ZSE). Therefore, rather than to focus on our past performance, in thisto fully exploit the huge market commentary, I will focus on our prospects for the year ahead.potential. The dollarisation of The Group will deliver strong financial performance in the year ahead premised on the increase in our subscriber base.the tariff ensured business Significant progress has already been made in achieving our goal of 2.5 million subscribers by 28 February 2010.viability. Our focus on innovation and our relentless pursuit of customer satisfaction are the key attributes that will assist us in achieving our financial and operational targets. SUBSCRIBER GROWTH The subscriber base grew by 83% to 1.2 million during the 12 months to 28 February 2009. The increase in subscriber numbers Econet Wireless Holdings Limited Annual Report 2009 12
  • 15. was due to expanded network capacity in Bulawayo and the sustainable growth through innovation and network expansion.two Matabeleland provinces. Because of the hyperinflation, The Company is committed to extending the frontiers ofthe Econet subscriber mix was significantly skewed towards communication through the deployment of new enablingthe prepaid offering. technologies and the provision of relevant communication solutions, simultaneously providing service excellence in theUSAGE improving economic circumstances. A combination of accelerated growth and innovation will unlock value for ourMinutes of user per subscriber are affected by tariff levels and shareholders and open new horizons for our customers.subscriber numbers. The low tariff regime that prevailedduring the first ten months of the financial year resulted inabnormal usage level of 260 minutes for post-paid customersand 150 minutes for prepaid customers. The high traffic levelscreated congestion on the network.INNOVATIONS D. MboweniDuring the year under review, Econet successfully launched Chief ExecutiveGPRS to selected customers. Trials of 3G were successfullyconducted in anticipation of the receipt of frequencies from 28 July 2009the regulator. These data-enabling technologies are beingcomplemented with Wi-Fi and broadband services that theEconet Group launched through its subsidiary, Ecoweb. Theinternational calling card, launched in October 2008, ensuredthat international calls were charged in foreign currency at atime that this resource was desperately needed. This helpedthe Group to meet some of its external obligations.PEOPLEThe business will continue to adopt progressive humanresources policies to attract and retain the best talent. Therehas been an exodus of human resources into the emergingmarkets of Africa, the Middle East and Asia. Econet hasrestructured its remuneration practices in such a way that ithas a competitive edge over other listed companies inZimbabwe. With the dollarisation, the business hasdeveloped staff retention packages that are competitive in theregion. The retention programme is linked to theperformance management system.LOOKING AHEADIt is hoped that the efforts and initiatives of Government,business and other players will create an enablingenvironment that will yield positive results in restoring viabilityfor the telecoms industry, thereby allowing it to be a catalystfor wider economic development. Econet is optimistic thatthe operating environment will continue to improve. Becauseof this, the business is working relentlessly to achieve Econet Wireless Holdings Limited Annual Report 2009 13
  • 16. Econet in the Community“Econet in the Community” has been actively involved in acommunity social health programme (“Stop Cholera Campaign”)and has continued to invest in education (Joshua NkomoScholarship) and social welfare (Capernaum Trust). The Group willcontinue to develop long-term partnerships with all thebeneficiaries of social investment initiatives. Econet Wireless Holdings Limited Annual Report 2009 14
  • 17. Corporate Social InvestmentEconet believes its future depends on the sustainable development of our communities.We remain firm in our belief that a companys success cannot environmental awareness is now more than just a factor ofbe measured on financial performance alone. Our success also social responsibility, but rather a business imperative.lies in the positive transformation of our communities. Joshua Nkomo Scholarship FundWe believe that every business has a responsibility beyond its The Joshua Nkomo Scholarship Fund continued with itsbasic responsibility to its shareholders; it is a responsibility to valuable work in the provision of funding to the nations mostthe people of the communities in which it serves. gifted students, who are groomed to be leaders. There was fresh focus on supporting maths and science students as partAs a pioneering Company, we are moving beyond corporate of the Groups contribution to the development of technologysocial responsibility to social innovation. Econet believes that in Zimbabwe.technology that does not transform lives is irrelevant. We mustprovide a service that contributes meaningfully to the Christian Community Partnership Trustimprovement of the lives of members of the communities that As an institution grounded in faith, our support for evangelicalwe serve. work continues through the Christian Community Partnership Trust, which was established in partnership with otherOur social role is therefore constantly being reviewed in order Christian businesses.to remain relevant to our communities. The Capernaum Trust‘National Healthcare Trust Zimbabwe’ (NHTZ) The Capernaum Trust was established in 1996 to transform theIn 2008, our social responsibility role took on a more direct and lives of orphaned children in economically disadvantagedurgent role. Under our health and welfare programme, Econet situations. The Trust continued its work to offer hope andprovided financial and logistical support to teams of dedicated inspiration to orphaned children. In the face of greater demandhealth workers that were involved in fighting the cholera For welfare intervention, the Trusts work continued in theepidemic that affected the country during the later part of provision of scholarships, food packs and life skills training to2008. over 26 000 orphans nationwide.We employed our wide airtime distribution network to spread Our involvement goes beyond the provision of materialawareness by printing anti-cholera messages on our recharge support, as the trust runs a deliberate and planned programmecards. designed to empower beneficiaries with life skills and activities to restore their self-esteem and groom them into inspiredOur involvement in fighting the cholera crisis opened our eyes leaders.to the urgent need to make our intervention in health caremore focused. Econet therefore established the National HIV/AIDS POLICYHealthcare Trust Zimbabwe in December 2008. Econet is convinced that HIV and AIDS have the potential toThe Trusts immediate task was in the procurement of essential waste valuable trained human resources and reducemedicines and equipment needed for delivery of basic productivity. We continue to recognise the huge impact of HIVhealthcare services, and in the provision of key support in the and AIDS on the wellbeing of our employees. This includes theirareas of communication. welfare outside the workplace, where staff face the burden of committing effort and resources to care and provide for familyRather than merely reacting to crisis, the Trust will implement a members. Policies and structures therefore continue to bemore proactive and sustained strategy for the rehabilitation followed to address this concern. Econet Wireless continues toand long-term maintenance of Zimbabwes health sector. The provide anti-retroviral drugs for the infected employees andTrust seeks to build and maintain capacity within the health other members of their immediate family. Through the “Live 2sector in Zimbabwe. Love” programme, the Company continued to encourage open dialogue among staff on HIV/AIDS. By encouraging openEnvironment debate on HIV and AIDS, we help remove the stigma attachedDuring the year, Econet also came up with a comprehensive to HIV and AIDS and increase access to critical information onEnvironmental and Waste Management Policy. Econet believes the pandemic. Econet Wireless Holdings Limited Annual Report 2009 15
  • 18. Directors’ ReportThe directors have pleasure in presenting their eleventh Pension FundAnnual Report and the Audited Financial Statements of The Groups pension fund scheme is administered by a Board ofEconet Wireless Holdings Limited and its subsidiaries for the Trustees. The Trustees manage the assets of the pension fund,year ended 28 February 2009. In the report “Group” refers to which are held separately from those of the Group. TheEconet Wireless Holdings Limited and its subsidiary pension scheme funds are handled only in accordance with thecompanies. rules of the pension fund.Principal Activities Corporate Social InvestmentThe Groups principal activities remained the same during the The Group continued with its commitment to the economicyear, namely the provision of cellular services, the provision and social development of the country. This commitmentof internet access services, transaction processing services derives from the Groups own commitment to Christian valuesand mobile banking services. and at the root of it is the desire to uphold and improve the quality of life of the people of Zimbabwe.The Group also maintained its investments in its subsidiaryand associated companies. It also continued to oversee the Through its “Econet in the Community” programme the Groupmanagement of these companies. continued with its social investment initiatives in education, environmental matters, health and social welfare and religiousConsolidated Results organisations.The statements of the Chairman and the Chief ExecutiveOfficer adequately cover the Groups financial results and its Donations to Political Partiesactivities during the year. The Group, as a matter of policy, does not contribute to any political party.Post-Balance Sheet eventsAn Extraordinary General Meeting of shareholders was held Auditorson 27 March 2009 at which shareholders approved a Shareholders will be asked to approve the remuneration of thetransaction whereby the Group entered into an instalment auditors for the year ended 28 February 2009. The auditors,sale agreement with Econet Wireless Global Limited for the Messrs Deloitte and Touche, have indicated their willingness topurpose of acquiring telecommunications equipment. continue in office. Approval for their reappointment will beDetails of the transaction were set out in the relevant circular sought at the Annual General Meeting.to Shareholders. By order of the BoardDividendsNo final dividend was declared to cater for the recovery of thebusiness.Share CapitalThe authorised share capital of the Group remained T. Nyambiraiunchanged during the year. CHAIRMANReservesThe movements in the reserves of the Group are shown in theStatement of Changes in Shareholder Equity.Directors S.T. MasiyiwaThe board membership stood at 11 during the year. Messrs DIRECTORJ.G.B. Pattison, T. Nyambirai and S.T. Masiyiwa will retire byrotation at the Groups Annual General Meeting and, beingeligible, offer themselves for re-election.At the Annual General Meeting shareholders will be asked toapprove payment of directors fees. C.A. BandaBorrowing Powers GROUP COMPANY SECRETARYThe details of the Groups borrowing powers are set out inNote 36 to the financial statements. 28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 16
  • 19. Directors’ Responsibility ForFinancial ReportingThe Directors of Econet Wireless Holdings Limited and its reviewed the performance and financial position of the Groupsubsidiary companies are responsible for the maintenance of to the date of signing of these financials and the prospects,adequate accounting records, the preparation, integrity and based on the budgets, and are satisfied that the Group is afair presentation of the financial statements and related going concern and therefore continue to adopt the goinginformation. The financial statements have not been concern assumption in the preparation of these financialprepared in accordance with International Financial statements.Reporting Standards in so far as the inflation indices have notbeen published since July 2008 and therefore these financial The financial statements set out on pages 26-60 were approvedstatements have not been adjusted to be in line with the by the Board of Directors on 28 July 2009 and are signed on itsrequirements of International Financial Reporting Standards behalf by:-(IAS 29) "Financial Reporting in Hyperinflationary Economies".Econet Wireless Holdings Limited and its subsidiarycompanies independent external auditors Messrs Deloitte &Touche, have audited the financial statements and theirreport appears in this annual report. T. Nyambirai CHAIRMANThe directors are also responsible for the systems of internalcontrol. These are designed to provide reasonable, but notabsolute, assurance as to the reliability of the financialstatements, and to safeguard, verify and maintainaccountability over assets, and to prevent and detect material S.T. Masiyiwamisstatements and losses. The systems are implemented and DIRECTORmonitored by suitably trained personnel with an appropriatesegregation of authority and duties. Nothing has come to theattention of the directors to indicate that any materialbreakdown in the functioning of these controls, proceduresand systems has occurred during the year under review. C.A. BandaAs a result of the uncertainties more fully described in note GROUP COMPANY SECRETARY4.3, the directors advise caution on the use of these financialstatements for decision-making purposes. The directors have 28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 17
  • 20. Corporate GovernanceCommitment to good corporate governance remains one of In the exercise of the above responsibilities, the Board executesthe guiding principles of Econet Wireless Holdings Limited full and effective control over the Group and monitorsand its subsidiary companies. The organisational values and executive management. It meets formally at least four times aethical behaviour within the business is testimony to this year to review the Groups performance.commitment. The commitment manifests itself by the strictobservance of the principles of transparency, responsibility The Board delegates certain specific responsibilities to aand accountability as set out in the Principles for Corporate number of committees and the boards of subsidiaryGovernance in Zimbabwe: Manual of Best Practice, the companies. It reviews and ratifies the appointment of directorsCadbury Report of the United Kingdom and the King Reports to the subsidiary boards.of South Africa. The Group also maintained its associationwith the Institute of Directors of Zimbabwe and continued Rights To facilitate the exercise of their responsibilities all directorswith its financial support for the institute. have unrestricted access to management, including the GroupTHE BOARD OF DIRECTORS Company Secretary, and to the Groups records and other information as and when they so require. The directors alsoComposition and appointment have authority to seek independent professional adviceFor the year ended 28 February 2009 the Board comprised regarding the Groups operations as well as those of its11 members with a broad range of business and industry subsidiaries.experience. Seven members of the Board are non-executivedirectors. A non-executive director chairs the Groups Board. Directors names The following are the directors who served during the year:Appointment of the non-executive directors is on the basis of Mr T. Nyambirai (Chairman), Mr S.T. Masiyiwa*, Mr P.J.their skills and experience or expertise in their respective Campbell, Mr R. Chidembo, Mr K.V. Chirairo*, Mr A.N.H.fields, the ultimate objective being to bring a balanced and Eastwood, Mr C. Fitzgerald, Mr D. Mboweni*, Mr J.G.B.independent judgement to the Groups business. The non- Pattison*, Mrs T.P. Mpofu and Mr Z.M.T. Wazara.executive directors are subject to election by shareholders. *ExecutiveAll directors retire by rotation and stand for re-election as Dr James Myers was appointed to the board of the Companyprovided for in the Companys Articles of Association. on 27 May 2009. Messrs Rugare Chidembo and ZacharyAccountability and delegated functions Wazara, both of whom were long-serving members of theThe Board of Directors is accountable for the Groups overall Board, retired from the Companys Board in May 2009.welfare and general outlook. It provides leadership and Directors interestssound judgement in directing the Group to achieve its As is the practice each year, the directors are required toobjectives and sustainable prosperity and uphold the best indicate in writing, whether they have any material interest ininterests of all the Groups stakeholders. The Board any contract of significance with the Group or any of itsformulates strategic objectives and key policies and has subsidiaries, which could give rise to a related conflict ofoverall responsibility for the following specific areas: interests. Directors are also required to disclose their other review and approval of the Groups strategic business business interests. With the exception of Mr T. Nyambirai, plans, incorporating operating and capital expenditure none of the directors had a material interest in any contract of budgets; setting of corporate objectives and performance significance to which the Group was a party during the year, targets; other than their service contracts. review and approval of major acquisitions and disposals; reviewing the share capital of the Group and subsidiaries Mr Nyambirai is the Group Chief Executive Officer of TN and recommending alteration thereof; Financial Services, which is one of the Groups financial reviewing annual financial statements and significant advisors. Mr Nyambirai is also the head of TN Medical scheme; changes in accounting policies; and a significant number of the Groups employees are members of monitoring and reviewing the Groups overall the scheme. He is also a partner in Mtetwa and Nyambirai performance. Legal Practitioners, a firm that provides legal services to the Group. Econet Wireless Holdings Limited Annual Report 2009 18
  • 21. The Group Company Secretary Financial Reporting Standards and facilitates the developmentAll Directors have access to the advice and services of the of new and improved accounting practices in the business. TheGroup Company Secretary. committee meets with the external auditors, management and internal auditors regularly to review internal accountingDirectors remuneration controls, auditing and risk management matters and financialThe remuneration of directors and senior executives is reporting.reviewed by the Audit and Remuneration Committee, whichis constituted of non-executive directors and chaired by a The committees primary functions are to review the Groupsnon-executive director. financial statements and submission thereof to the Board for approval; to assess the effectiveness of internal systems andBOARD COMMITTEES controls; to ensure preservation of, and accountability for, the assets of the Group. It also reviews the fees of the GroupsThe Board delegates certain of its responsibilities to a external auditors.number of committees. The committees operate withindefined terms of reference laid down by the Board. Members of the Audit and Remuneration Committee are: Mr P.J. Campbell (Chairman), Mr K.V. Chirairo, Mr A.N.H.The members of the Econet Wireless Holdings Limited Board Eastwood, Mr C. Fitzgerald, Mrs M. Harris, Mr D. Mboweni,record of attendance at Board and committee meetings Mrs T.P. Mpofu and Mr Z.M.T. Wazara (since resigned).which they were eligible to attend, is set out below: Investments CommitteeAudit and Remuneration Committee The Investments Committee is responsible for the formulationThe Audit and Remuneration Committee of the Group and and recommendation of the Groups investments policy to theits subsidiary companies is constituted of non-executive Board for consideration and approval. It evaluates potentialdirectors and chaired by a non-executive director. It meets investments, expansion and development of the network andnot less than four times a year. The Chief Executive Officer new products. It also examines the technical aspects ofand the Financial Director are ex-officio members of the acquisitions, mergers and reconstructions, and reviewscommittee. security controls of the technical and engineering operations.Through this committee the Group achieves meaningful and Members of the Investments Committee are: Mr C. Fitzgeraldresponsible reporting by way of comprehensive and open (Chairman), Mr S.T. Masiyiwa, Mr K.V. Chirairo, Mrs M. Harris,disclosure and explanation of its financial results. In Mr D. Mboweni, Mrs T.P. Mpofu, Mr J.G.B. Pattison and Z.M.T.conjunction with the Groups external auditors, the Wazara (since resigned).committee carries out regular reviews of International EWHL AUDIT AND INVESTMENTS SUBSIDIARY BOARD MEETINGS REMUNERATION COMMITTEE COMMITTEE NON-EXECUTIVE EXECUTIVE Meetings held 4 4 3 4 16 S.T. Masiyiwa 3 N/A 3 N/A N/A T. Nyambirai 3 N/A N/A N/A N/A P.J. Campbell 3 3 3 N/A N/A R. Chidembo 3 1 N/A 3 N/A A.N.H. Eastwood 3 4 3 N/A N/A C. Fitzgerald 3 1 3 N/A N/A K.V. Chirairo 3 4 3 N/A 11 D. Mboweni 3 4 3 N/A 11 T.P. Mpofu 3 4 2 N/A 9 J.G.B. Pattison 3 N/A 1 N/A 4 Z.M.T. Wazara 2 1 1 2 N/A Econet Wireless Holdings Limited Annual Report 2009 19
  • 22. Corporate GovernanceForeign Loans Committee employees are regularly and systematically seconded toThe committee reviews the Groups major foreign loans overseas and regional operations to ensure retention of suchobligations and puts forward recommendations on the skills.servicing of these obligations. It is the Groups policy to promote the highest standards ofInvestor Relations ethical behaviour among its employees. Employees areCommunication with the public and shareholders remains a required to observe the highest ethical standards in theprimary policy of the Group. The Groups executive meets execution of their duties.with the shareholders and investment analysts at least bi-annually after the release of the Groups results. Insider tradingThe Groups Annual Report and other corporate publications The Group complies with the Zimbabwe Stock Exchange listingare available on the corporate website www.econet.co.zw. requirements in relation to transactions by directors and employees in securities issued by the Group. No director orAt the Groups Annual General Meeting each substantial employee or his/her nominees or members of their immediateissue is put to the meeting for discussion and/or noting. The family, may deal in any securities of the Group at any timemeeting is also invited to receive and adopt the financial when he/she is in possession of unpublished, price-sensitivestatements and directors report. information.For Extraordinary General Meetings the level of proxy votes The Group operates a closed period prior to the publication oflodged for and against each resolution are disclosed at each its interim and annual results, during which directors andmeeting, together with details of abstentions. employees of the Group may not deal in securities of theEmployment and equity practices Group. In terms of policy, directors and employees who wishThe Group has in place a communications system which to transact in the shares of the Group, even outside of theensures that employees are kept informed on matters Groups “closed or block period”, are required to obtain theaffecting them and also factors influencing the Groups clearance of the Chairman.financial performance. This is done through regularbriefings, presentations, electronic mailings and the Internal controls Internal controls comprise methods and procedures adoptedcorporate website. by management to achieve the objectives of safeguardingThe share option scheme, which had been in operation for assets, preventing and detecting errors and fraud, ensuring thesome time, expired at the end of November 2008. The accuracy and completeness of accounting records, and thescheme was not renewed. preparation of accurate and reliable financial statements. The Board confirms that throughout the financial year, and up toThe Group is an equal opportunity employer. Applications the approval of the Annual Report, there have beenfrom disabled persons receive full and fair consideration, procedures in place for identifying, evaluating and managinghaving regard to the aptitudes and abilities of the applicant. the significant risks to the achievement of the Groups strategicIn the event of disability every effort is made to ensure that objectives. This is in line with the Boards responsibility for theemployment continues and appropriate training is given. Groups system of internal control and review of itsCareer development and promotion of disabled people is, as effectiveness. Detailed policies and procedures are in placefar as possible, identical to that of other employees. across the Group, covering the regulation and reporting of processes and transactions.The Group takes a positive approach to equality anddiversity. It takes on and promotes development As part of the internal controls the Group has an internal auditopportunities whenever these arise, with a view to division. The division constantly monitors and reports on thedeveloping skills and expertise. Skilled and professional Groups systems of internal control risk management. The Econet Wireless Holdings Limited Annual Report 2009 20
  • 23. head of the division attends the meetings of the Audit andRemuneration Committee and submits a report at themeeting. The Audit and Remuneration Committee hasoverall responsibility of reviewing the internal controlsystems and reports its findings to the Board.Independence of AuditorsThe Groups Audit and Remuneration Committee confirmsthe independence of the Auditors, Deloitte & Touche, whoare engaged by the Group for audit-related services. TheGroup uses other accounting firms to assist with non-auditmanagement consultancy work as and when required.Going concernIn light of the current financial situations and existingborrowing facilities available to the Group, the Directorshave a reasonable expectation that the Group has adequateresources to continue in operational existence for theforeseeable future. Accordingly, they continue to adopt thegoing-concern basis in preparing the annual financialstatements.By order of the BoardT. NyambiraiCHAIRMANS.T. MasiyiwaDIRECTORC.A. BandaGROUP COMPANY SECRETARY28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 21
  • 24. Certificate by Company Secretary In my capacity as Group Company Secretary, I confirm that, in terms of the Companies Act (Chapter 24:03), the Group has lodged with the Registrar of Companies, the returns required under the Act and the returns are true and correct. CHARLES A. BANDA GROUP COMPANY SECRETARY 28 July 2009CHARLES A. BANDAGroup Company Secretary Econet Wireless Holdings Limited Annual Report 2009 22
  • 25. Deloitte & Touche Kenilworth Gardens 1 Kenilworth Road Newlands PO Box 267 HARARE Zimbabwe Tel: (263) (4) 746248/54 (263) (4) 746271/5 Fax:(263) (4) 746255 www.deloitte.co.zwREPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF ECONET WIRELESS HOLDINGS LIMITEDReport of the independent auditors on the financial statementsWe have audited the accompanying consolidated financial statements of Econet Wireless Holdings Limited, which comprisethe consolidated balance sheet as at 28 February 2009, and the consolidated income statement, consolidated statement ofchanges in equity and consolidated cash flow statement for the year then ended, and a summary of significant accountingpolicies and other explanatory notes set out on pages 26 to 60.Directors responsibility for the financial statementsThe directors are responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with International Financial Reporting Standards and the provisions of the Zimbabwe Companies Act (Chapter24:03). This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation andfair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting andapplying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.Auditors responsibilityOur responsibility is to express an opinion on these consolidated financial statements, based on our audit. We conducted ouraudit in accordance with International Standards on Auditing. Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statementsare free of material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidatedfinancial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks ofmaterial misstatement of the consolidated financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of theconsolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entitys internal controls. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.Basis for adverse opinion on compliance with International Financial Reporting StandardsThe Zimbabwe economy is recognised as being hyperinflationary for purposes of financial reporting. These financialstatements have not been prepared in conformity with International Financial Reporting Standards in that the requirements ofIAS 29, (Financial Reporting in Hyperinflationary Economies) have not been complied with. The standard requires that financialstatements that report in the currency of a hyperinflationary economy should be stated in terms of the measuring unit currencyat the balance sheet date.The non-compliance with IAS 29 arises from the inability to reliably measure inflation due to the interaction of multipleeconomic factors which are pervasive to the Zimbabwean economic environment as explained in Note 4.3. A member firm of Deloitte Touche TohmatsuAudit Tax Consulting Financial Advisory Econet Wireless Holdings Limited Annual Report 2009 23
  • 26. REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF ECONET WIRELESS HOLDINGS LIMITED (Continued)Adverse opinion on non-compliance with International Financial Reporting StandardsIn our opinion, because of the significance of the matters described in the Basis for Adverse Opinion paragraph, the financialstatements do not give a true and fair view of the financial position of Econet Wireless Holdings Limited as at 28 February 2009,and of the results of its operations and its cash flows for the year then ended in accordance with International FinancialReporting Standards.Report on legal and regulatory requirementsThese financial statements have been properly prepared in accordance with the accounting policies set out in note 4, andcomply with the disclosure requirements of the Companies Act (Chapter 24:03), and the relevant statutory instruments (SI33/99 and SI 62/96).Without further qualifying our opinion, we draw your attention to the following:Fair value determination for transactions, assets and liabilitiesThe determination of fair values presented in the financial statements is affected by the prevailing economic environment andthe fair values may therefore be distorted. This may result in significant variations in fair values, depending on factors andassumptions used in the determination of the fair values.The significant assumptions and the estimation uncertainties pertaining to items that are carried at fair value have beendisclosed in Note 5 to these financial statements.Supplementary InformationThe United States dollars supplementary balance sheet and income statement set out on pages 62 and 63 that are included aspart of the financial statements are not covered by this report. Consequently, no assurance is expressed on the United Statesdollar balance sheet and income statement.Deloitte & ToucheChartered Accountants (Zimbabwe)Harare, Zimbabwe28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 24
  • 27. Margins improved significantly followingthe dollarisation of the tariff. We continueto seek ways of enhancing shareholdervalue as the business expands its revenuestreams and product innovation. Econet Wireless Holdings Limited 2009 Financial Statements Consolidated Income Statement 26 Consolidated Balance Sheet 27 Company Balance Sheet 28 Consolidated Statement of Changes in Equity 29 Consolidated Cash Flow Statement 30 Notes to the Consolidated Financial Statements 31 Supplementary Information 62 Detachable proxy formEconet Wireless Holdings Limited Annual Report 2009 25
  • 28. Consolidated Income StatementFor the year ended 28 February 2009All figures in ZW$ NOTES 2009Revenue 7 825 302 187Cost of sales and external services sold (118 793 899)Gross profit 706 508 288Other income 27 747 442Employee costs (49 975 857)Operating costs- Administration (90 519 652)- Marketing and sales (12 047 695)- Network (16 911 377)- Other (438 729 260)Operating profit before depreciation 126 071 889Depreciation (741 051)Profit from operations 8 125 330 838Investment income 9 351 388Net finance costs 10 (1 122 388)Share of profit of associate 19 6 027 572 755Impairment of investment in associate 19 (5 889 130 504)Fair value gain on financial assets 14 692 561Profit before foreign currency exchange losses and taxation 277 694 650Foreign currency exchange losses 10.1 (2 004 905 402)Loss before taxation (1 727 210 752)Taxation 11 650 191 949Loss for the year (1 077 018 803)Attributable to:Equity holders of the parent (1 080 524 533)Minority interest 3 505 730 (1 077 018 803)Basic loss per share (dollars) 12 (6 434)Headline loss per share (dollars) 12 (31 544)Diluted basic loss per share (dollars) 12 (6 416)Diluted headline loss per share (dollars) 12 (31 458) Econet Wireless Holdings Limited Annual Report 2009 26
  • 29. Consolidated Balance SheetAs at 28 February 2009All figures in ZW$ NOTES 2009ASSETSNon-current assetsProperty, plant and equipment 13 8 315 276 059Investment property 14 31 656Deferred tax assets 16 856 152 803Held-to-maturity investments 18 213 828 784Investment in associate 19 138 442 251Available-for-sale investments 20 870 750 600Held-for-trading investments 22 1 784 721Total non-current assets 10 396 266 874Current assetsInventories 23 226 039 172Trade and other receivables 24 1 857 037 371Bank balances and cash 286 891 020Total current assets 2 369 967 563Total assets 12 766 234 437EQUITY AND LIABILITIESEQUITYCapital and reservesShare capital 25 -Share premium 25 -Reserves 6 353 201 312Accumulated losses (1 080 680 647)Total capital and reserves 5 272 520 665Minority interest 219 242 549Total shareholders equity 5 491 763 214LIABILITIESNon-current liabilitiesDeferred tax liabilities 16 2 627 086 578Interest-bearing debt 29 864 120 178Total non-current liabilities 3 491 206 756Current liabilitiesTrade and other payables 26 1 875 893 960Provisions and accruals 27 139 358 537Taxation 138 363 720Deferred revenue 28 316 756 836Interest-bearing debt 29 1 312 891 414Total current liabilities 3 783 264 467Total equity and liabilities 12 766 234 437T. NYAMBIRAI K.V. CHIRAIRO C.A. BANDACHAIRMAN DIRECTOR GROUP COMPANY SECRETARY28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 27
  • 30. Company Balance SheetAs at 28 February 2009All figures in ZW$ NOTES 2009ASSETSNon-current assetsProperty, plant and equipment 25 446 200Investment in subsidiaries - loan 17.2 23 321 250Total non-current assets 48 767 450Current assetsInter-company balances 17.2 394 183 998Total assets 442 951 448EQUITY AND LIABILITIESEQUITYCapital and reservesShare capital 25 -Share premium 25 -Reserves 386 099 630Accumulated profit 49 217 958Total capital and reserves 435 317 588LIABILITIESNon-current liabilitiesDeferred tax liabilities 7 633 860Total equity and liabilities 442 951 448The principal information has been stated in the consolidated financial statements; therefore no cash flow, statement of changes in equityor income statement is provided for the Company.T. NYAMBIRAI K.V. CHIRAIRO C.A. BANDACHAIRMAN DIRECTOR GROUP COMPANY SECRETARY28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 28
  • 31. Consolidated Statement of Changes in EquityFor the year ended 28 February 2009 RESERVES ACCUMULATED ATTRIBUTABLE TO MINORITY TOTAL LOSSES EQUITY HOLDERS INTERESTAll figures in ZW$ OF THE PARENTBalance at 29 February 2008 - - - - -Revaluation of property, plantand equipment 7 957 839 282 - 7 957 839 282 323 982 378 8 281 821 660Deferred tax arising on revaluation (2 301 238 450) - (2 301 238 450) (102 016 301) (2 403 254 751)Fair value gain on available-for-salefinancial instruments 870 750 600 - 870 750 600 - 870 750 600Deferred tax arising on fair value gain (174 150 120) - (174 150 120) - (174 150 120)Loss for the year - (1 080 524 533) (1 080 524 533) 3 505 730 (1 077 018 803)Exchange differences arisingon translation - 229 950 229 950 (6 229 258) (5 999 308)Share buy-back - (386 064) (386 064) - (386 064)Balance at 28 February 2009 6 353 201 312 (1 080 680 647) 5 272 520 665 219 242 549 5 491 763 214Capital redemption reserve fund - when shares are redeemed or purchased wholly or partly out of the Company profits, an amount equal to thenominal value of the shares is transferred to the capital redemption reserve fund.Non-distributable reserves- the reserve arises from the revaluation of property, plant and equipment, available-for-sale financial assets and reserveswhich are not classified under other categories. Where a revalued financial asset is sold, the portion of the reserve that relates to that financial asset,and is effectively realised, is recognised in profit and loss. Where a revalued financial asset is impaired, the portion of the reserve that relates to thatfinancial asset is recognised in profit or loss.Share capital, share premium and capital redemption reserve fund reflected a nil position as a result of the redenomination of the currency. Econet Wireless Holdings Limited Annual Report 2009 29
  • 32. Consolidated Cash Flow StatementFor the year ended 28 February 2009All figures in ZW$ NOTES 2009Cash flows to operating activitiesOperating loss before working capital changes 30.1 (323 806 847)Net movement in working capital 30.2 248 932 790Cash utilised in operations (74 874 057)Cash flows to investing activitiesNet finance cost (1 122 388)Net expenditure on property, plant and equipment (34 195 449)Net cash used in investing activities (35 317 837)Cash flows from financing activitiesShare buy-back (386 064)Increase in interest-bearing debt 397 468 978Net cash from financing activities 397 082 914Net increase in cash and cash equivalents 286 891 020Cash and cash equivalents at the beginning of the year -Cash and cash equivalents at the end of the year 30.3 286 891 020 Econet Wireless Holdings Limited Annual Report 2009 30
  • 33. Notes to the Consolidated Financial StatementsFor the year ended 28 February 20091 GENERAL INFORMATION The Company was incorporated in Zimbabwe on 4 August 1998 and its main operating subsidiary on 23 August 1994. The address of its registered office and principal place of business is Econet Park, 2 Old Mutare Road, Msasa, Harare. The main business of the Group is mobile telecommunications and related value added services. These financial statements are presented in Zimbabwe dollars, being the currency of the primary economic environment in which the Group operates. Supplementary financial information has been presented in United States dollars as some of the transactions during the year were in United States dollars. Subsequent events - Demonetisation of Zimbabwe dollar In the fiscal policy statement presented by the Minister of Finance on 16 July 2009, the Zimbabwean dollar was demonetised. The fiscal statement introduced the use of multiple currencies.2 ADOPTION OF NEW AND REVISED STANDARDS2.1 Standards and Interpretations effective in the current period In the current year, the Group has adopted all of the revised Standards and Interpretations applicable to the Group issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for the accounting periods beginning on or after 1 January 2008. The adoption of these new and revised Standards and Interpretations did not have a material impact on the financial statements of the Group. IFRIC 12 "Service Concession Arrangements (effective 1 January 2008)" IFRIC 13 "Customer Loyalty Programmes" IFRIC 14 IAS 19: "The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction" (effective 1 January 2008).3 STANDARDS AND INTERPRETATIONS ISSUED BUT NOT EFFECTIVE At the date of the authorisation of these financial statements, the following Standards and Interpretations, which are applicable to the Group, were either issued or revised but not yet effective: IFRS 2: Share-based Payments (Revised) Effective from 1 January 2009. IFRS 3: Business Combinations (Revised). Effective from 1 July 2009. IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (Revised). Effective from 1 July 2009. IFRS 7: Financial Instruments: Disclosures. IAS 1: Presentation of Financial Statements (Revised). Effective from 1 January 2009. IAS 16: Property, Plant and Equipment (Revised). Effective from 1 January 2009. IAS 19: Employee Benefits. IAS 20: Accounting for Government Grants and Disclosures of Government Assistance. IAS 23: Borrowing costs (Revised). Effective from 1 January 2009. IAS 27: Consolidated and Separate Financial Statements (Revised). Effective from 1 July 2009. IAS 28: Investment in Associates (Revised). Effective from 1 July 2009. IAS 29:Financial Reporting in Hyperinflationary Economies. IAS 32: Financial Instruments: Presentation (Revised). Effective from 1 January 2009. IAS 36: Impairment of Assets (Revised). Effective from 1 January 2009. IAS 38: Intangible Assets (Revised). Effective from 1 January 2009. IAS 39: Financial Instruments: Recognition and Measurement (Revised). Effective from 1 July 2009. IAS 40: Investment Property (Revised). Effective from 1 January 2009. The Directors anticipate that all of the above Interpretations will be adopted in the Groups financial statements for the period commencing 1 March 2009 and that the adoption of those Interpretations will not have a material impact on the financial statements of the Group in the period of initial application.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES4.1 Basis of accounting The financial statements have not been prepared in accordance with International Financial Reporting Standards (IFRS) in that the absence of inflation indices has made it impossible to produce inflation-adjusted financial statements in compliance with the requirements of IAS 29: "Financial Reporting in Hyperinflationary Economies." The principal accounting policies of the Group, which are set out below, are consistent in all material respects with those applied in the previous year and conform with standards issued by the International Accounting Standards Board (IASB) with the exception of non compliance with IAS 29. Econet Wireless Holdings Limited Annual Report 2009 31
  • 34. Notes to the Consolidated Financial StatementsFor the year ended 28 February 20094 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)4.2 Currency reforms The Zimbabwean currency was restated on 1 August 2008 by the removal of ten zeros and on 1 February 2009 by the removal of a further twelve zeros. In total, twenty two digits were removed by the Reserve Bank of Zimbabwe as part of currency reforms. As a result, prior year comparatives which are reflected in these financial statements in the currency unit prevailing at 28 February 2009, have become inconsequential to these financial statements. Accordingly, no comparative figures are shown. The Zimbabwe dollars shown in these financial statements have been restated in accordance with these changes.4.3 Limitations of financial reporting in the Zimbabwean economic environment The uncertainties in the adverse Zimbabwean economic environment during the financial year ended February 2009 have resulted in limitations in financial reporting. These uncertainties include:4.3.1 Non-availability of official inflation indices Inflation indices were not published from July 2008. Subsequent estimates by economists were wide ranging, between percentages of trillions and quadrillions. The use of foreign currency and multiple pricing which were prevalent in the economy distorted the process of measuring inflation. Given the chronic hyperinflation, the time lapse between the balance sheet and reporting dates rendered the financial information presented in inflation adjusted financial statements less useful and relevant for making economic decisions. Official inflation indices, when available, were only available at month end periods. Therefore the use of assumptions to determine inflation in the intervening periods rendered the information presented susceptible to estimation errors. In these circumstances, inflation-adjusted financial statements have not been prepared as required by the International Financial Reporting Standards (IAS 29): "Financial Reporting in Hyperinflationary Economies."4.3.2 Measurement of transactions The measurement of transactions in local currency was dependent on the mode of settlement. As a result there may be significant variations in the valuation of assets and liabilities. Accordingly, such valuations may be inherently unreliable. These uncertainties have been aggravated by; Multiple Pricing There were multiple prices for the same commodity/service, largely dependent on the modes of settling transactions from cheque/transfer, cash, fuel coupons, foreign currency etc. Multiple pricing resulted in distortions in financial reporting. Multiple exchange rates There were various exchange rates applicable which varied significantly namely; cash rates, cheque rates, transfer rates and Old Mutual Implied Rates. If a transaction occurs at more than one rate and is recorded at its nominal value this may result in distortions in financial reporting. Dollarisation The introduction of licensed operations in foreign currency and the basing of most other transactions in foreign currency for most of the non-licensed operators, created challenges for the Company in determining its functional currency in the latter part of 2008. As a result of these uncertainties and inherent limitations, caution is advised in the use of these financial statements for decision- making purposes.4.4 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to the end of February of each year. Control is achieved where the Company has the power to govern the financial and operating activities of an entity so as to obtain benefits from its activities. The results of the subsidiaries acquired or disposed of during the year are included in the consolidated financial statements, from the effective date of acquisition or up to the effective date of disposal. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances and income and expenses are eliminated in full on consolidation. Minority interests in the net assets of consolidated subsidiaries (excluding goodwill) are identified separately from the Groups equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minoritys share of changes in equity since the date of the combination. Losses applicable to the minority, in excess of the minoritys interest in the subsidiarys equity, are allocated against the interests of the Group, except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses. Econet Wireless Holdings Limited Annual Report 2009 32
  • 35. 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)4.5 Business combinations Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquirees identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 "Business Combinations" are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations," which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Groups interest in the net fair value of the acquirees identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit and loss. The interest of minority shareholders in the acquiree is initially measured at minoritys proportion of the net fair value of assets, liabilities and contingent liabilities recognised.4.6 Investment in associates An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale. Investments in associates are carried in the balance sheet at indexed cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses in associates in excess of the Groups interest in those associates are not recognised, unless the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Any excess of the cost of acquisition, over the Group’s share of the net fair values of the identifiable net assets of the associate at the date of acquisition, is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group’s share of the net fair values of the identifiable net assets of the associate at the date of acquisition (that is discount on acquisition) is credited to profit and loss in the period of acquisition. Where a Group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.4.7 Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition, over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary, associate or jointly controlled entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost, less any accumulated impairment losses. Negative goodwill arising on acquisition, represents the excess of fair value of the net identifiable assets acquired over the cost of the acquisition. Negative goodwill, in excess of the fair values of the non-monetary assets acquired, is immediately recognised in the income statement. For the purpose of impairment testing, goodwill is allocated to each of the Groups cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit, may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit, pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss is recognised in profit and loss and not reversed in subsequent periods. On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit and loss on disposal. The Groups policy for goodwill arising on the acquisition of an associate, is described under "Investments in associates" above. Econet Wireless Holdings Limited Annual Report 2009 33
  • 36. Notes to the Consolidated Financial StatementsFor the year ended 28 February 20094 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)4.8 Intangible assets4.8.1 Project development costs Project development costs are recognised as an expense in the period in which they are incurred, except where it is reasonably anticipated that these costs will be recovered through future commercial activity, in which case the costs are capitalised. Assessments of carrying values are done regularly and if there is an indication that the asset has suffered an impairment loss, an impairment is recognised immediately in profit or loss.4.8.2 Pre-operating expenditure Expenditure incurred before the commencement of operations is capitalised, and is amortised on a straight-line basis over a period of ten years.4.8.3 Internet licence fees Licence fees represent the cost of acquisition of a Class B Internet Access Provider licence. The licence is amortised on a straight-line basis over 8 years. The carrying amount of the licence is reviewed annually and written down for permanent impairment where it is considered necessary.4.9 Other investments Unquoted shares are shown at cost unless the directors are of the opinion that there has been a permanent diminution in value, in which case a provision is raised which is charged to the income statement.4.10 Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units, for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value, less cost to sell and value in use. Value in use calculations may not be practical in our current economy and therefore we have used fair value less cost of sale. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than the carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.4.11 Foreign currency transactions and balances Transactions in foreign currencies are translated into Zimbabwe dollars at rates of exchange prevailing at the date of the transaction. For the period from 1 January 2009 to 28 February 2009, the Group transacted in multiple currencies, including the United States dollar, the South African rand and the Zimbabwe dollar. The basis of translation of foreign currency transactions to the Zimbabwe dollar is detailed below. Zimbabwe dollar financial information Monetary assets and liabilities denominated in foreign currencies are translated into Zimbabwe dollars at rates of exchange prevailing on the balance sheet date. Profit or loss arising on exchange are dealt with in the income statement. Other transaction and translation gains or losses, arising on settlement or conversion, are normally dealt with in the income statement in the determination of profit from operations. Econet Wireless Holdings Limited Annual Report 2009 34
  • 37. 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)4.12 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment made of specific borrowings, pending their expenditure on qualifying assets, is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are expensed in the period in which they are incurred.4.13 Property, plant and equipment Property, plant and equipment are stated in the balance sheet at their revalued amounts, being fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date. Any revaluation increase arising on the revaluation of property, plant and equipment is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to the profit and loss to the extent of the decrease previously charged. A decrease in the carrying amount arising on the revaluation of property, plant and equipment is charged to profit or loss to the extent that it exceeds the balance, if any, held in the property revaluation reserve relating to a previous revaluation of the asset. Revaluations are performed by suitably qualified independent professional appraisers. The basis of valuation is as follows: Buildings - Open market value Network equipment - Gross replacement cost Computer equipment and furniture - Open market value Motor vehicles - Open market value Depreciation on revalued assets is charged to profit or loss. On the subsequent sale or retirement of revalued property, plant and equipment, the attributable revaluation surplus remaining in the revaluation reserve is transferred directly to retained earnings. No transfer is made from the revaluation reserve to retained earnings, except when an asset is derecognised. Properties in the course of construction for production or for other purposes not yet determined are carried at cost less any recognised impairment loss. Costs include professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Groups accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for intended use. Depreciation is charged so as to write off the value of assets over their estimated useful lives, using the straight-line method. The residual values of assets are reassessed each year, and where the value exceeds the carrying amount, depreciation is no longer charged. When the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. The residual values of each asset category have been assessed by looking at the fair value of the asset now after taking into account age, usage and obsolescence. In determining the recoverable amount of assets, expected cash flows are discounted to their present values. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in profit or loss.4.14 Investment properties Investment properties are properties held to earn rentals and/or for capital appreciation. It is stated at its fair value at the balance sheet date, as determined by independent professional valuers. Gains or losses arising from changes in the fair value of investment properties are included in profit or loss for the period in which they arise. Where investment properties are still being developed, these are classified as capital work in progress and are disclosed under property, plant and equipment. Econet Wireless Holdings Limited Annual Report 2009 35
  • 38. Notes to the Consolidated Financial StatementsFor the year ended 28 February 20094 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)4.15 Leases The Group as lessor Leases where the Group transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee, are classified as finance leases. The outstanding principal amounts, less unearned finance charges, are included in advances and other accounts on the balance sheet. The finance charges earned are computed at the effective interest rates in the contracts and are brought into income in proportion to balances outstanding under each contract. The unearned finance charges are shown as a deduction from advances and other accounts. Leases of assets under which all the risks and benefits of ownership are effectively retained by the lessor, are classified as operating leases. Rental income from operating leases is recognised on a straight-line basis over the lease term. The Group as lessee Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation, so as to achieve a constant rate of interest on the remaining liability. Finance charges are charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Groups general policy on borrowing costs (see policy note 4.13 property, plant and equipment). Contingent rentals are recognised as an expense in the periods in which they are incurred. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which the economic benefits from the leased assets are consumed.4.16 Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises all costs necessary to bring the inventories to their present location. Net realisable value represents the estimated selling price less all estimated costs incurred in the marketing, selling or distribution, where applicable. The basis of determining cost is the weighted average method. Obsolete and slow-moving inventories are identified and written down to their estimated economic or realisable value. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses. Write downs to net realisable value and inventory losses are expensed in the period in which they occur.4.17 Revenue recognition Revenue, which excludes Value Added Tax, cash discounts and sales between Group companies, represents the invoiced value of goods and services supplied by the Group. The Group measures revenue at the fair value of the consideration received or receivable. Revenue is recognised only when it is probable that economic benefits associated with the transaction will flow to the Group and the amount of revenue and associated costs incurred, can be measured reliably. If necessary, revenue is split into separately identifiable components. The main categories of revenue and bases of recognition for the Group are:4.17.1 Contract products Connection fees Revenue is recognised on the date of activation. Access charges Revenue is recognised in the period to which it relates. Airtime Revenue is recognised on the usage basis. Econet Wireless Holdings Limited Annual Report 2009 36
  • 39. 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)4.17 Revenue recognition (continued)4.17.2 Pre-paid products Airtime Revenue is recognised when a customer utilises the airtime, at which point the risks and rewards have been transferred. Upon purchase of an airtime voucher the customer receives the right to make outgoing voice calls and to use the short message service to the value of the voucher. Revenue is deferred until such time as the customer uses the airtime, or the credit expires. Starter packs Revenue is recognised on the date all risks and rewards associated with the starter packs are transferred to the purchaser.4.17.3 Internet services Subscriptions Subscriptions revenue is recognised on a straight-line basis over the period to which it relates. Services Revenue is recognised on the accrual basis, in accordance with the substance of the agreement. Other sales Revenue is recognised on the date all risks and rewards associated with the sale are transferred to the purchaser.4.17.4 Automated transaction services Software and hardware sales Revenue is recognised when goods are delivered and ownership has passed. Service revenues Revenue is recognised on the accrual basis, in accordance with the substance of the agreement.4.17.5 Other Other sales Revenue is recognised on the date all risks and rewards associated with the sale are transferred to the purchaser. Services Revenue is recognised on the accrual basis, in accordance with the substance of the agreement. Interest income Interest income is accounted for on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, to that assets carrying amount. Dividend income Dividend income from investments is recognised when the shareholders rights to receive payment have been established.4.18 Taxation Income tax expense represents the sum of the tax currently payable and deferred tax.4.18.1 Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit, as reported in the income statement, because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Groups liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date. Econet Wireless Holdings Limited Annual Report 2009 37
  • 40. Notes to the Consolidated Financial StatementsFor the year ended 28 February 20094 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)4.18 Taxation (continued)4.18.2 Deferred tax Deferred tax is recognised on differences between the carrying amounts of assets and liabilities, in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available, against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised, if temporary differences arise from goodwill or from initial recognition of other assets and liabilities, in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of the deferred tax assets is reviewed at each balance sheet date and reduced, to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the periods when the liability is settled, or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.4.19 Employee benefits Retirement benefits are provided for Company employees through an independently administered defined contribution fund and the National Social Security Authority (NSSA). Payments to defined contribution retirement benefit schemes are charged as an expense when they fall due. Payments to state managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.4.20 Share-based payments Equity-settled share-based payments to employees and others providing similar services, are measured at the fair value of the equity instruments at the grant date. For equity settled share-based payment transactions with employees, the fair value determined at the grant date of the equity settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Groups estimate of the equity instruments that will eventually vest. At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with a corresponding adjustment to the equity settled employee benefits reserve. This policy is applied to all equity settled share-based payments granted after 7 November 2002. Equity settled share-based payment transactions with other parties are measured at their fair value of the goods or services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of equity instruments granted, measured at the date the entity obtains the goods or the counter-party rendered the service.4.21 Financial instruments4.21.1 Financial assets Investments are recognised and derecognised on trade date, where the purchase or sale of an investment is under a contract whose terms require delivery of the investment, within the timeframe established by the market concerned, and are initially measured at fair value plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specific categories: financial assets as “at fair value through profit or loss” (FVTPL), held to maturity investments, ‘’available-for-sale” (AFS) financial assets and “loans and receivables”. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.4.21.1.1Financial assets at FVTPL Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL. A financial asset is classified as held for trading if: - it has been acquired principally for the purpose of selling in the near future; or - it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit taking. Econet Wireless Holdings Limited Annual Report 2009 38
  • 41. 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)4.21.1 Financial assets (continued)4.21.1.1 Financial assets at FVTPL (continued) A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if: - such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or - the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Groups documented risk management or investment strategy, and information about the grouping is provided internally on that basis. Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.4.21.1.2 Held-to-maturity investments Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity, are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using effective interest rate method less impairment, with revenue recognised on an effective-yield basis. Effective interest rate method The effective interest rate method is a method of calculating the amortised cost of a financial asset and of allocating interest over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or, where appropriate, a shorter period. Income is recognised on an effective interest rate basis for debt instruments other than those assets designated as at FVTPL.4.21.1.3 AFS financial assets Listed shares and listed redeemable notes held by the Group, that are traded in an active market, are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in equity in the investments revaluation reserve, with the exception of impairment losses, interest calculated using the effective interest rate method and foreign exchange gains and losses on monetary assets, which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in profit or loss for the period. Dividends on AFS equity instruments are recognised in profit or loss when the Groups right to receive the dividends is established. The fair value of AFS monetary assets denominated in a foreign currency, is determined in that foreign currency and translated at the spot rate at the balance sheet date. The change in fair value attributable to translation differences that result from change in amortised cost of the asset is recognised in profit or loss, and other changes are recognised in equity.4.21.1.4 Loans and receivables Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market, are classified as “loans and receivables”. Loans and receivables are measured at amortised cost, using the effective interest rate method less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.4.21.1.5 Impairment of financial assets Financial assets other than those at FVTPL are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For unlisted shares classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. For all other financial assets, including redeemable notes classified as AFS and finance lease receivables, objective evidence of impairment could include: -significant financial difficulty of the issuer or counterparty; or -default or delinquency in interest or principal payments; or -it becoming probable that the borrower will enter bankruptcy or financial reorganisation Econet Wireless Holdings Limited Annual Report 2009 39
  • 42. Notes to the Consolidated Financial StatementsFor the year ended 28 February 20094 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)4.21.1 Financial assets (continued)4.21.1.5 Impairment of financial assets (continued) For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Groups past experience of collecting payments, and increase in the number of delayed payments in the portfolio past the average period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. With the exception of the AFS equity instruments if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed, does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of AFS equity securities, impairment losses previously recognised through profit or loss, are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised directly in equity.4.21.1.6 De-recognition of financial assets The Group derecognises financial assets only when the contractual rights to the cash flows from the assets expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.4.21.2 Financial liabilities Financial liabilities are classified as either financial liabilities at "FVTPL" or "other financial liabilities".4.21.2.1 Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if: - it has been incurred principally for the purpose of repurchasing in the near future. - it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit taking. A financial liability other than a financial liability held for trading, may be designated as at FVTPL upon initial recognition if: - such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or - the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Groups documented risk management or investment strategy, and information about the grouping is provided internally on that basis. Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial liability.4.21.2.2 Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest rate method, with interest expense recognised on an effective yield basis. The effective interest rate method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Econet Wireless Holdings Limited Annual Report 2009 40
  • 43. 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)4.21.2 Financial liabilities (continued)4.21.2.3 Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Groups obligations are discharged, cancelled or they expire.4.22 Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.4.23 Segment information The principal segments of the Group have been identified on the primary basis by business segment. The basis is representative of the internal structure used for management reporting. Segment revenue reflects both sales to external parties and inter-group transactions. The segment result is presented as segment profit including net finance costs. Taxation is excluded in arriving at segment results. Segment operating assets and liabilities are only those items that can be specifically identified with a particular segment.5 SIGNIFICANT ASSUMPTIONS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Residual values of property, plant and equipment During the year management assessed the residual values of property, plant and equipment. Residual values of each asset category have been assessed by looking at the fair value of the asset after taking into account age, usage and obsolescence. These residual values will be reassessed each year and adjustments for depreciation will be done in future periods if there is indication of diminution in value. Useful lives of property, plant and equipment In determining the useful lives of property, plant and equipment management considered the local operating environment, technology changes, use, type, make and model of each asset category. Conversion of the United States dollar for January and February transactions and balances The transactions for the period January to February which were all denominated in United States dollar were translated using the average interbank rate for each of the the two months. All balances as at 28 February were converted from the United States dollar to the Zimbabwe dollar using the closing interbank rate of US$1: ZW$95.42. Convenience translation of Zimbabwe dollars into United States dollars for supplementary information Revenue transactions in local currency were converted into United States dollars using the official exchange rate, from primarily March to September, since all tariff reviews by the regulator were based on the official exchange rate. For the period October to December, a cash rate was applied while all United States dollar denominated revenues were isolated and reported on in real terms.Operating costs were converted using the exchange rate that was dependent on the mode of settlement. For the balance sheet, property, plant and equipment was revalued by independent professional valuers, and the valuation was carried out in United States dollars. Foreign-denominated assets and liabilities were reported at their United States dollars carrying values. The share capital was translated at the official exchange rate ruling at the date of incorporation of 4 August 1998. Share premium, capital reserves and retained earnings were determined as the residual balance after conversion and valuation of all other balance sheet items. For purposes of ascertaining income tax opening values, closing income tax values in Zimbabwe dollars as at 28 February 2009 were established using the interbank rate applicable at that time. Tax liability was categorised into two periods, one dealing with the Zimbabwe dollar environment and the other dealing with the United States dollar environment. Econet Wireless Holdings Limited Annual Report 2009 41
  • 44. Notes to the Consolidated Financial StatementsFor the year ended 28 February 20095 SIGNIFICANT ASSUMPTIONS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) Equity accounting for associates The reporting date for Africa First ReNaissance Limited (AFRE) is 31 December of each year. For the purpose of applying the equity method of accounting, the financial statements of AFRE for the year ended 31 December 2008 have been used. Due to the fact that AFRE is listed, no interim financial information is available at 28 February 2009, as these institutions are not able to release interim financial information for purposes of the Group consolidation due to Zimbabwe Stock Exchange restrictions on the release of financial information. The effects of equity accounting for the Groups associates is disclosed in note 19. Investments Econet Wireless Holdings Limited held investments in Interfresh, Kingdom Meikles Africa Limited (KMAL), Old Mutual, Pearl Properties and Rainbow Tourism Group, which was acquired during the year under review. The opening balances at the time of dollarisation, were arrived at after converting the historical cost by the Old Mutual Implied Rate as at 1 March 2008, and the closing carrying values were determined by reference to closing Zimbabwe Stock Exchange prices at year end. Any impairment or fair value gain was accounted for through equity except for Old Mutual that went through profit and loss. CELLULAR TRANSACTIONS NETWORK INTERNET PROCESSING All figures in ZW$ OPERATIONS SERVICES SYSTEMS BEVERAGES INVESTMENTS TOTAL6 BUSINESS SEGMENTS The principal activities set out in note 4.23 are the basis on which the Group reports its primary segment information. Segment information for the year ended 28 February 2009 Revenue 800 749 754 15 063 790 3 303 902 6 184 741 - 825 302 187 Profit from operations 124 046 924 8 498 903 (4 579 282) (1 786 965) (107 691) 126 071 889 Net financing income / (charge) 752 211 - (1 892 049) 17 450 - (1 122 388) Profit/(loss) before forex gain or loss adjustments 126 194 194 8 498 903 (6 471 332) 11 138 325 138 334 560 277 694 650 Total assets 10 584 561 176 188 445 005 96 866 519 885 211 487 1 011 150 250 12 766 234 437 Liabilities (6 702 597 313) (72 135 759) (83 065 960) (275 198 718) (141 473 473) (7 274 471 225) Net assets 3 881 963 861 116 309 246 13 800 559 610 012 769 869 676 777 5 491 763 212 Capital expenditure 32 847 043 458 523 - 889 883 - 34 195 449 Depreciation, amortisation and impairment 11 703 729 348 - - - 741 051 Number of employees 511 42 29 265 1 848 The main business of the Group is cellular network operations and included in assets and liabilities are intercompany balances. Other segments comprise of internet services, transaction processing solutions and beverages, which individually constitute less than 10% of the Group. Econet Wireless Holdings Limited Annual Report 2009 42
  • 45. All figures in ZW$ 20097 REVENUE Revenue is made up of : Local airtime 308 835 297 Interconnection fees 390 290 262 International airtime 104 296 385 Automated transaction services 576 768 Internet services 13 390 739 Beverages 6 184 741 Other sales 1 727 995 825 302 187 Included in revenue are foreign interconnect charges of Z$140million (2008 - nil).8 PROFIT FROM OPERATIONS This is arrived at after charging:- Auditors’ remuneration 16 933 291 Deferred revenue charge for the year 316 756 836 Depreciation 741 051 Directors emoluments: - For services as directors 2 977 833 - For management services 1 551 595 Lease charges 1 013 0599 INVESTMENT INCOME Profit on disposal of investments 351 38810 NET FINANCE COSTS Finance income 11 886 095 Finance cost (13 008 483) (1 122 388)10.1 Exchange (losses)/gains Arising from -Long-term debt (2 050 013 638) -Econet Wireless Group balances 47 494 116 -Held-to-maturity investments 213 828 784 -Other balances (216 214 664) (2 004 905 402)11 TAXATION Current income taxation 140 130 979 Withholding tax on interest 1 483 928 Deferred taxation reversal (791 806 856) (650 191 949) Econet Wireless Holdings Limited Annual Report 2009 43
  • 46. Notes to the Consolidated Financial StatementsFor the year ended 28 February 2009All figures in ZW$ 2009 2009 Percentage11 TAXATION (continued) Tax rate reconciliation Reconciliation of tax charge: Loss before tax (1 727 210 752) Reconciliation of tax charge Normal tax at 30.9% (533 708 122) 30.9 Disallowable (income) /expenses 629 576 518 (36.45) Tax effect of share of results of associate 1 862 519 981 (107.83) Impairment of associate (1 819 741 326) 105.36 Withholding tax on interest 1 483 928 (0.09) 140 130 979 (8.11) GROUP All figures in ZW$ 2009 200812 LOSS PER SHARE Loss Basic loss basis The calculation is based on the loss attributable to ordinary shareholders and the number of shares in issue for the year, which participated in the loss of the Group. The weighted number of shares in issue for the year amounted to: 167 945 937 154 743 198 Fully diluted loss basis The calculation is based on the loss attributable to ordinary shareholders and the number of shares in issue after adjusting to assume conversion of share options not yet exercised. The weighted average number of shares after the dilutive effect amounted to: 168 406 819 155 204 080 Headline loss basis Headline loss per share is calculated by dividing the headline earnings shown below by the same divisor used in the basic and diluted loss basis. Loss attributable to shareholders (1 080 524 533) - Adjustment for non-operating items (gross of tax): Impairment of associate (5 889 130 504) - Tax effect on adjustments 1 885 814 420 - (5 297 669 401) - Econet Wireless Holdings Limited Annual Report 2009 44
  • 47. GROUPAll figures in ZW$ 2009 200812 LOSS PER SHARE (continued) Number of shares Weighted number of ordinary shares for the purposes of basic loss per share 167 945 937 154 743 198 Effect of potentially dilutive ordinary shares: Share options 460 882 460 882 Weighted number of ordinary shares for the loss of diluted loss per share 168 406 819 155 204 080 Basic loss per share (dollars) (6 434) - Headline loss per share (dollars) (31 544) - Diluted basic loss per share (dollars) (6 416) - Diluted headline loss per share (dollars) (31 458) - LAND COMPUTER CAPITAL AND NETWORK EQUIPMENT MOTOR WORK-INAll figures in ZW$ BUILDINGS EQUIPMENT AND FURNITURE VEHICLES PROGRESS TOTAL13 PROPERTY, PLANT AND EQUIPMENT COST At 1 March 2008 - - - - - - Additions - - 2 070 845 1 377 32 123 228 34 195 450 Disposals - - - - - - Revaluation 1 570 399 204 12 990 003 131 700 006 365 277 540 283 - 15 537 948 983 At 28 February 2009 1 570 399 204 12 990 003 131 702 077 210 277 541 660 32 123 227 15 572 144 432 ACCUMULATED DEPRECIATION At 1 March 2008 - - - - - - Charge for the period - - 741 008 43 - 741 051 Disposals - - - - - - Revaluation - 7 256 127 323 - - - 7 256 127 323 At 28 February 2009 - 7 256 127 323 741 008 43 - 7 256 868 374 CARRYING VALUE At 28 February 2009 1 570 399 204 5 733 875 809 701 336 202 277 541 617 32 123 227 8 315 276 059 At 1 March 2008 - - - - - - Certain of the network equipment was erected on rented premises. The valuation, which was performed by an independent professional valuer, conforms to International Valuation Standards, was determined based on open market value for all asset categories, except network equipment which was valued on a gross replacement basis. Had property, plant and equipment not been revalued the carrying amount would have been nil. Econet Wireless Holdings Limited Annual Report 2009 45
  • 48. Notes to the Consolidated Financial StatementsFor the year ended 28 February 2009All figures in ZW$ 200914 INVESTMENT PROPERTY At 1 March 2008 - Fair value adjustments 31 656 At 28 February 2009 31 656 The Directors are of the opinion that the value of investment property is not in excess of its recoverable amount.15 INTANGIBLE ASSETS The Groups intangible assets has nil balances in Zimbabwe dollar terms because of the revaluation of the Zimbabwe dollar by the removal of 22 zeroes cumulatively. The same applies to project costs. PROPERTY, PLANT AND DEFERREDAll figures in ZW$ EQUIPMENT REVENUE OTHERS TOTAL16 DEFERRED TAXATION The following are the major deferred tax liabilities and assets recognised by the Group, and the movements thereon, during the current period. At 1 March 2008 - - - - Charge / (credit) to profit for the year 181 437 (95 027 051) (696 961 242) (791 806 856) Charge to equity 2 403 254 751 - 159 485 879 2 562 740 630 At 28 February 2009 2 403 436 188 (95 027 051) (537 475 362) 1 770 933 775 Included in the other category is the deferred tax arising from unrealised exchange differences, the general bad debts provision, operating lease recoupments and prepayments. All figures in ZW$ 2009 The following are the deferred tax balances: Deferred tax liabilities 2 627 086 578 Deferred tax assets (856 152 803) 1 770 933 775 Econet Wireless Holdings Limited Annual Report 2009 46
  • 49. PERCENTAGEAll figures in ZW$ HOLDINGS 200917 INVESTMENTS AND LOANS IN SUBSIDIARIES COMPANY17.1 Cost of investments Econet Wireless (Pvt) Ltd 100% - (Cellular network operator in Zimbabwe) Data Control & Systems (1996) (Pvt) Ltd 100% - (Internet service provider) Transaction Processing Systems (Pvt) Ltd 84.3% - (Computer data processing service provider) Franchise Development & Management 100% - All Communications (Pvt) Ltd (Telephone and accessories merchandiser) Chitungwiza Wholesale Meat Suppliers (Pvt) Ltd 100% - (Property investment) Econet Wireless Capital Holdings (Pvt) Ltd 100% - (Investment company) Pentamed Investments (Pvt) Ltd 100% - (Investment company) Total investments in subsidiaries -17.2 Net loans to group companies Group balances Econet Wireless (Pvt) Ltd 346 689 882 Econet Wireless Global Limited 47 494 116 394 183 998 Group balances Pentamed Investments (Pvt) Ltd 23 321 250 Net loans from subsidiaries 417 505 248 Total investments and loans in subsidiaries 417 505 248 The Directors are of the opinion that the costs of the investments in subsidiaries are not in excess of their recoverable amounts. Loans and other group balances are unsecured, interest free and have no fixed terms of repayment. Econet Wireless Holdings Limited Annual Report 2009 47
  • 50. Notes to the Consolidated Financial StatementsFor the year ended 28 February 2009All figures in ZW$ 200918 HELD-TO-MATURITY INVESTMENTS At 1 March 2008 - Additions - Disposals - Interest - Exchange gain 213 828 784 213 828 784 OWNERSHIP INTERESTAll figures in ZW$ 2009 PERCENTAGE19 INVESTMENTS IN ASSOCIATES Details of the Groups associates are as follows: Name of associate Africa First ReNaissance Corporation Limited 21.8 The fair value of the Groups interests in associates was $138 442 251 as at 28 February 2009. All figures in ZW$ 2009 The movements in investments in associates are as follows: Opening balance - Share of revaluation reserve of associate 802 620 749 Share of profit of associate 6 027 572 755 6 830 193 504 Impairment (6 691 751 253) Closing balance 138 442 251 The market value of the investments at the reporting date was US$5 646 602 Summarised financial information in respect of the Groups associates’ is set out below: Total assets 93 412 741 303 Total liabilities (50 774 323 380) 42 638 417 923 Groups share of associates’ net assets 138 442 251 Revenue 114 581 028 417 Profit 27 649 416 306 Groups share of associates profit for the year 6 027 572 755 Impairment computation Open market value 138 442 251 Cost and post-acquisition reserves (6 830 193 504) Impairment (6 691 751 253) The impairment charged to the income statement was arrived at after comparing the open market value of the shares of the associate with the carrying amount as at 28 February 2009, less accumulated Groups share of associate reserves. Econet Wireless Holdings Limited Annual Report 2009 48
  • 51. All figures in ZW$ 200920 AVAILABLE-FOR-SALE INVESTMENTS Quoted investments Opening balance - Additions (cash) - Fair value gain 870 750 600 Closing balance 870 750 600 The fair value of the investments at the reporting date was $870 750 600.21 DIRECTORS’ AND MANAGEMENT’S LOANS There were no material management loans issued during the year.22 INVESTMENTS HELD-FOR-TRADING Opening balance - Fair value gain 1 784 721 Closing balance 1 784 721 Investments held at fair value through profit and loss are comprised of equity investments. The fair value is based on the stock market published price.23 INVENTORIES Merchandise 47 423 947 Raw materials 3 756 929 Spares, stationery and other 174 858 296 226 039 172 The directors are of the opinion that the inventory amounts are recorded at values that are not in excess of their recoverable amounts. All inventories are expected to be recovered within 12 months. Econet Wireless Holdings Limited Annual Report 2009 49
  • 52. Notes to the Consolidated Financial StatementsFor the year ended 28 February 2009All figures in ZW$ 200924 TRADE AND OTHER RECEIVABLES Trade receivables 2 064 640 589 Prepayments and other receivables 433 824 529 Provision for doubtful debts (641 427 747) 1 857 037 371 The average credit period on sale of goods is 30 days. No interest is charged on trade receivables for the first 15 days from the date of invoice. Thereafter, interest is charged at the minimum bank lending rate ruling at the end of that month. There are currently no receivables that are past due which are not impaired. Movement in the provision for allowance for doubtful debts Balance at the beginning of the year - Impairment losses recognised (641 427 747) Closing balance (641 427 747) The directors believe that the allowance for doubtful debt is adequate. Ageing of impaired trade receivables 30-Current 640 644 444 60-90 398 951 90-120 384 352 120+ - Total 641 427 74725 SHARE CAPITAL Group and company25.1 Authorised 300 000 000 (2008-300 000 000) Shares of: 200 000 000 (2008- 200 000 000) Ordinary shares of $nil each - - 100 000 000 (2008-100 000 000) Class "A" shares of $nil each - -25.2 Issued and fully paid 94 408 686 Ordinary shares of $nil each - 73 883 893 Class "A" shares of $nil each - - The nominal value of share capital is nil because of the currency reforms as explained in note 4.2. Econet Wireless Holdings Limited Annual Report 2009 50
  • 53. NUMBER SHARE SHAREAll figures in ZW$ OF SHARES CAPITAL PREMIUM25.2 SHARE CAPITAL (continued) Movement in share capital Balance at 29 February 2008 167 496 457 - - Issue of shares 599 - - Script dividend 1 795 523 - - Share buy-backs (196 596) - - Balance at 28 February 2009 169 095 983 - -25.3 Class "A" shares On 1 July 2003, Econet Wireless Holdings Limited (EWHL) entered into an arrangement with Dunstone (Private) Limited, to acquire its 100% owned subsidiary Econet Wireless Capital Holdings (EWCH). Under the arrangement, Econet Wireless Holdings Limited issued 739 843 680 (73 984 368 after share consolidation) Class "A" shares in exchange for 999 000 EWCH shares. These shares rank parri passu in all respects with the existing issued ordinary shares with the exception that, in the event of EWH becoming the owner of Econet Wireless (Private) Limited (EWL) shares, and deciding to distribute the shares to its members, the Class "A" shares will not participate in the distribution of the EWL shares.25.4 Scrip issues During the year the Group issued 1 795 523 shares through a script dividend. As at 28 February 2009 the number of shares in issue (before accounting for script issue) were 167 497 056.25.5 Share buy-back Under the authority granted at the Annual General Meeting of 18 December 2003 and 31 December 2004, the Company purchased its own shares on the market. The units purchased were 0.12% of the previously issued share capital of the Company with the nominal value of $nil for a total consideration of $386 064.25.6 Ordinary shares and share options 8 631 825 ordinary shares of $nil each were placed under the control of the directors who were authorised to issue them pursuant to the rules of the Company’s share option scheme. The balance of the unissued shares are under the indefinite unrestricted control of the directors, subject to the limitations imposed by the Companies Act (Chapter 24:03) and the Zimbabwe Stock Exchange (ZSE). The options, which are exercisable over 10 years, have been granted to purchase ordinary shares of $nil each at the middle market price obtained on ZSE on the most recent day immediately preceding the option date. GRANT DATE GRANT DATE GRANT DATE GRANT DATE 23 DECEMBER 1999 31 DECEMBER 2000 31 DECEMBER 2001 31 OCTOBER 2002 Exercise price ZW$ 63.50 112.50 100.00 85.50 Granted up to 30 June 2002 261 500 404 595 356 584 - 1 July 2002 - - - 2 000 000 Exercised 2003 (63 578) - - - Exercised 2004 (173 294) (22 454) - - Exercised 2005 (12 394) (36 794) (218 002) - Exercised 2006 (8 535) (7 784) (1 892) (950 000) Exercised 2007 3 703 (19 057) - (1 050 000) Exercised 2008 - (1 716) - - 7 402 316 790 136 690 - Econet Wireless Holdings Limited Annual Report 2009 51
  • 54. Notes to the Consolidated Financial StatementsFor the year ended 28 February 2009 28 FEBRUARY 2009 CLASS “A” SHARES SHARE ORDINARY SHARES ORDINARY SHARES OPTION25 SHARE CAPITAL (continued)25.7 Directors’ shareholding At 28 February the 2009 the directors held directly and indirectly the following number of shares in the Company: S.T. Masiyiwa 73 883 893 4 891 075 - T. Nyambirai - 10 302 - R. Chidembo - 821 596 - A. Eastwood - 8 990 - C. Fitzgerald - 1 028 449 - D. Mboweni - 834 688 - T.P. Mpofu - 1 019 757 - J. Pattison - 228 619 - Z. Wazara - 2 672 023 - K. Chirairo - 135 823 - P.J. Campbell - - - 29 FEBRUARY 2008 CLASS “A” SHARES SHARE ORDINARY SHARES ORDINARY SHARES OPTION S.T. Masiyiwa 73 098 819 10 248 853 - T. Nyambirai - - - R. Chidembo - 1 236 113 - A. Eastwood - 8 896 - C. Fitzgerald - 1 017 522 16 404 D. Mboweni - 751 336 - T.P. Mpofu - 1 008 519 - J. Pattison - 217 788 - Z. Wazara - 2 831 219 - K. Chirairo - 216 982 - P.J. Campbell - - - All figures in ZW$ 200926 TRADE AND OTHER PAYABLES Trade payables and accruals Trade accounts payable 587 692 100 Other payables 1 288 201 860 1 875 893 960 Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period on purchases is seven days. After this period escalations are negotiated in relation to inflation. The Group has financial risk management policies in place to ensure that all payables are settled within the agreed credit timeframe. Econet Wireless Holdings Limited Annual Report 2009 52
  • 55. All figures in ZW$ 200927 PROVISIONS AND ACCRUALS Provisions and accruals 139 358 537 The provisions and accruals balance is made up of the following; BALANCE AT CURRENT UTILISED BALANCE AT All figures in ZW$ 1 MARCH 2008 PROVISION PROVISION 28 FEBRUARY 2009 Licence fees provision - 103 137 549 - 103 137 549 Warranties provision-terminals - 306 490 - 306 490 Bonus and commissions - 19 623 973 - 19 623 973 Leave pay - 16 290 524 - 16 290 524 - 139 358 536 - 139 358 536 The licence fees provision is the liability payable to Post and Telecommunication Regulatory Authority of Zimbabwe which is based on cellular network revenue.All figures in ZW$ 200928 DEFERRED REVENUE Prepaid deferred revenue 316 756 836 The deferred revenue arises from the unused prepaid airtime and product support fees. The Directors are of the opinion that the carrying amounts approximate the fair values of the services to be provided. Econet Wireless Holdings Limited Annual Report 2009 53
  • 56. Notes to the Consolidated Financial StatementsFor the year ended 28 February 2009 USD29 INTEREST-BEARING DEBT At 1 March 2008 16 326 868 Additions during the year 18 739 954 Repayments (12 251 777) At 28 February 2009 22 815 045 Closing exchange rate 95.42 ZW$ 2 177 011 593 Included in the interest-bearing debt balance are unrealised exchange losses of ZW$1 779 542 615. All figures in ZW$ 2009 Long-term portion ZW$ 864 120 178 Short-term portion ZW$ 1 312 891 414 2 177 011 592 The maturity profile for the interest-bearing USD debt is disclosed in note 34.10. Summary of borrowing arrangements African Export Import Bank (AFREXIM Bank) Included in the balance above is US$2 million owed to Africa Export and Import Bank ("the bank"). The loan is secured by foreign currency receivables and network equipment with a carrying amount of US$20.8 million. The duration of the loan is 36 months effective 1 July 2006, with a floating interest rate (Libor + 3.25%). As at year end the interest rate was 8.3 percent per annum. The last date of repayment of this facility is 28 May 2009. In terms of the conditions of this loan, the Group requires the approval of the bank to incur further borrowings and to declare dividend payments. The agreement also requires that all the Groups foreign revenues be deposited into a collection account held with the bank or a nominated agent of the bank. ZTE The balance due to ZTE is US$20.8 million as at 28 February 2009. A total of US$18.7 million was drawn during the year to fund network upgrade and expansion. The duration of the loan is 48 months, with a fixed interest rate of 7.29 percent per annum. The loan is secured by the equipment purchased, which has a carrying amount of US$27 million. The last date of repayment of this facility is 23 July, 2011. Econet Wireless Holdings Limited Annual Report 2009 54
  • 57. All figures in ZW$ 200930 CASH FLOW INFORMATION30.1 Cash generated from operations Loss before taxation (1 727 210 752) Adjustments for: Depreciation 741 051 Profit on disposal (351 388) Finance income (11 886 095) Finance cost 13 008 483 Fair value gain (14 692 561) Unrealised foreign currency exchange losses 1 565 713 831 Impairment of associate 5 889 130 504 Equity profit of associate (6 027 572 755) Impact of translations (10 687 166) Cash generated by operations before working capital changes (323 806 847)30.2 Movements in working capital Increase in inventories (226 039 172) Increase in trade and other receivables (1 857 037 371) Increase in trade and other payables 1 875 893 960 Increase in provisions and accruals 139 358 537 Increase in deferred revenue 316 756 836 248 932 79030.3 Cash and cash equivalents Short-term investments - Bank balances and cash 286 891 020 286 891 020 Econet Wireless Holdings Limited Annual Report 2009 55
  • 58. Notes to the Consolidated Financial StatementsFor the year ended 28 February 2009All figures in ZW$ 200931 RELATED PARTY TRANSACTIONS Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between Group companies and other related parties are disclosed below.31.1 Transactions Liquid Telecommunications Ltd Member of Econet Wireless Sales (139 529 199) Global Group (interconnection services) TN Financial Services Common directorships Expense (Private) Limited Financial Advisory Services 77 258 13931.2 Balances Liquid Telecommunications Ltd Member of Econet Wireless Debtor 653 579 195 Global Group Econet Wireless Holding Company Debtor 47 494 116 Global Limited Liquid Telecommunications Ltd Member of Econet Wireless Creditor (45 228 412) Global Group The interconnection services were provided at the Group’s approved price list. The amounts outstanding from related companies are unsecured and will be settled in cash. No guarantees have been given or received and no expense has been recognised in the period for bad or doubtful debts in respect of amounts owed by related parties. All figures in ZW$ 200931.3 Compensation of key management personnel The remuneration of directors and other members of key management during the year was as follows: Short-term benefits 5 123 639 Post-employment benefits - 5 123 639 The remuneration of directors and key executives is determined by the audit and remuneration committee, having regard to the performance of the individuals and market trends.32 SUBSIDIARIES In the previous financial year the Group through Pentamed Investments (Private) Limited acquired 63% of Mutare Bottling Company (Private) Limited (MBC). The cost of acquisition of MBC was paid by a share swap arrangement. The Group issued 4 412 113 shares in exchange for 6 300 000 MBC shares. Econet Wireless Holdings Limited Annual Report 2009 56
  • 59. 33 GROUP EMPLOYEE BENEFITS33.1 Econet Wireless Group Pension Fund This is a defined contribution scheme. under the scheme each of the members and the Company contribute to the fund at a rate of 7% of their pensionable emoluments. The members may elect to contribute in excess of the stipulated amount up to the maximum of 10%, or such amount as may be sanctioned by the trustees of the fund. The contributions are made through monthly deduction by the Company from members salaries and remitted to the fund. During the year a total of ZW$2 891 864 was paid towards the fund.33.2 National Social Security Authority Scheme This is a defined benefit scheme promulgated under the National Social Security Act of 1989. The Companys obligation under the scheme is limited to specific contributions legislated from time to time. These are presently 3% of pensionable emoluments up to a maximum of $4.2 million per month for each employee as at 28 February 2008. During the year a total of $3 276 615 was paid towards the fund.34 FINANCIAL RISK MANAGEMENT34.1 Capital risk management The Group manages its capital structure to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of debt and equity. The capital structure of the Group consists of debt which includes the borrowings disclosed in note 29, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings. The Groups risk management committee reviews the capital structure on a semi-annual basis. As a part of this review, the committee considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the committee, the Group will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.34.2 Gearing ratio The Groups risk management committee reviews the capital structure on a semi-annual basis. As part of this review the committee considers the cost of capital and the risks associated with each class of capital. The gearing ratio at the year end was as follows: All figures in ZW$ 2009 Debt (i) 2 177 011 592 Cash and cash equivalents (286 891 020) Net (cash) / debt 1 890 120 572 Equity (ii) 5 491 763 214 Net debt to equity ratio (i) Debt is defined as long and short-term borrowings as detailed in note 29. (ii) Equity includes all capital and reserves of the Group.34.3 Categories of financial instruments Financial assets Held-for-trading investments 1 784 721 Held-to-maturity investments 213 828 784 Loans and receivables (including cash and cash equivalents) 2 143 928 391 Available-for-sale investments - equity instruments 870 750 600 At the reporting date, there is no significant concentration of credit risk. The carrying amount reflected above represents the Groups maximum exposure to credit risk for such loans and receivables. Econet Wireless Holdings Limited Annual Report 2009 57
  • 60. Notes to the Consolidated Financial StatementsFor the year ended 28 February 200934 FINANCIAL INSTRUMENTS (continued)34.4 Financial risk management objectives The Groups corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyses exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest-rate risk and price risk), credit risk, liquidity risk and cash flow interest-rate risk. The Groups Audit Committee, consisting of executive and non-executive directors, meet on a regular basis to analyse, amongst other matters, currency and interest rate exposures and re-evaluate treasury management strategies against revised economic forecasts. Compliance with Group policies and exposure limits is reviewed at quarterly Board meetings.34.5 Market risk The Groups activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see (34.6) below) and interest rates (see (34.7) below).34.6 Foreign currency risk management The Group is exposed to foreign currency risk through the funding of its network equipment. The Group also incurs expenditures in foreign currency for maintenance and upgrade of the network equipment. The current foreign currency exposures emanate from the foreign receivables, foreign payables, the African Export Import Bank loan and the ZTE loan. The Group has a dedicated committee of the Board which reviews the loan exposures on a regular basis and monitors repayment plans. The Group has been able to meet its obligations in the current financial period and the Directors believe that appropriate measures have been implemented to ensure that the Group has the ongoing capacity to meet its obligations arising from these exposures. Application of exchange rates in the preparation of the financial statements - the Group does not intend to settle its liabilities using local revenues. It is the intention of management to settle the Groups foreign obligations using foreign revenues, and through raising additional capital in foreign currency to settle the foreign currency obligations of the Group; - the Postal and Telecommunications Authority of Zimbabwe (“POTRAZ”) uses this rate to determine the tariffs that will be applied by the mobile business in terms of the COSITU model. This model uses a cost plus formula to determine the tariffs. All costs that are in foreign currency are converted at this rate in order to determine the tariffs. The Directors believe that it is appropriate to apply the same exchange rate to the foreign currency transactions of the Company so that costs are determined on the same basis as the income levels.34.7 Interest rate risk management Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group invests in money market instruments which are subject to changes in interest rates on the local money markets. The Group’s policy is to adopt a non-speculative approach to managing interest rate risk and to only invest in instruments that are approved by the Investments Committee of the Board of Directors. Approved funding instruments include; bankers acceptances, call loans, overdrafts, foreign loans and where appropriate, long-term loans. The Group has borrowings that are subject to both fixed interest rates and floating interest rates. Details of the Group’s borrowings are described in note 29. The Board of Directors has a committee that is dedicated to reviewing the loan exposures and repayment plans for the Group’s external borrowings. The committee that reviews the loan exposures meets on a regular basis and uses various models to project the Group’s risk exposures and proposes methods to deal with the risk arising in an appropriate manner. This committee also approves the term sheets for such borrowings, and ensures that the interest rate exposure of the Group is appropriately managed. The sensitivity of the Group’s balance sheet and income statement to the changes in interest rates on its material exposures, is apparent from the information disclosed in note 29 to these financial statements. The Directors, at the reporting date, were not aware of any information or events that may have a significant impact on the reported profit and loss of the Group or that would result in material changes in the structure of the Group’s balance sheet and therefore, no sensitivity analysis of the Group’s exposure to interest rate risk has been prepared.34.8 Other price risks Other price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk and currency risk) whether those changes are caused by factors specific to the individual financial instrument or to its issuer or, factors affecting all similar financial instruments traded in that market. Econet Wireless Holdings Limited Annual Report 2009 58
  • 61. 34 FINANCIAL INSTRUMENTS (continued)34.8 Other price risks (continued) The Group invests in tradable securities that are quoted on the Zimbabwe Stock Exchange and maintains two portfolios for these investments; a trading portfolio and a long-term investment portfolio. The Investments Committee of the Board of Directors is responsible for evaluating investment opportunities and authorising strategic and short-term investments of the Group. This committee consists mainly of non-executive Directors and meets regularly to evaluate the risk exposures and to propose mitigating mechanisms to limit the Group’s exposure.34.9 Credit risk management Credit risk refers to the risk that the counterparty will default on its contractual obligations, resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Groups exposure and the credit ratings of its counterparties are continuously monitored and the credit exposure is controlled by counterparty limits that are reviewed and approved regularly. Financial assets, which potentially subject the group to concentrations of credit risk, consist principally of cash, short-term deposits, trade receivables and intercarrier receivables and payables. The Group’s cash equivalents are placed with high quality financial institutions. Trade receivables are presented net of the allowance for doubtful debts. Credit risk with respect to debtors is limited due to the widespread customer base and ongoing credit evaluations to maintain credit worthiness of the customers. Where appropriate, trade receivables are converted onto the prepaid service. Intercarrier receivables and payables are regulated by interconnect contracts. Intercarrier receivables and payables for foreign cellular traffic are managed through a reputable foreign finance house which ensures the net monthly outstanding amounts are collected from the foreign interconnect partners. No guarantees were provided as at the balance sheet date.34.10 Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Groups short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The table below details the Groups remaining contractual maturities on loans: All figures in US$ 1-3 MONTHS 3 MONTHS-1 YEAR 1-5 YEARS TOTAL Interest bearing 2 000 000 11 759 080 9 055 965 22 815 04535 GOING CONCERN The Directors have assessed the ability of the Company and the Group to continue operating as a going concern and believe that at the preparation of these financial statements, the going-concern assumption is still appropriate. However, the Directors believe that under the current economic environment a continuous assessment of the ability of the Company and the Group to continue to operate as a going concern will be performed, to determine the continued appropriateness of the going-concern assumption that has been applied in the preparation of these financial statements." The Groups balance sheet shows a net current liability position as at 28 February 2009 of ZW$1 413 296 904. The Directors have however, assessed the cash flows and performance of the Company and are satisfied that the Group will be able to pay its debts when they fall due.36 BORROWING POWERS In terms of the Companys Articles of Association, the Directors may exercise the powers of the Company to borrow up to 200% of the aggregate of: - the issued share capital and share premium or stated capital of the Company and: - the distributable and non-distributable reserves, including unappropriated profits of the Company reduced by any adverse amount reflected in the income statement, excluding: - goodwill - revaluation reserves arising prior to 28 February of each year - provision for taxation, deferred tax, and any balance standing to the credit of the tax equalisation account. The current borrowings are within the limit. Econet Wireless Holdings Limited Annual Report 2009 59
  • 62. Notes to the Consolidated Financial StatementsFor the year ended 28 February 2009 All figures in US$ 200937 CAPITAL COMMITMENTS Authorised and not contracted 123 800 000 The capital expenditure is to be financed from internal cash generation, extended supplier credits and bank credit.38 CONTINGENT LIABILITIES There were no contingent liabilities at the balance sheet date.39 EVENTS AFTER THE BALANCE SHEET DATE At an Extraordinary General Meeting held on 27 March 2009, the shareholders approved that the Directors of the Company be authorised to enter into an instalment sale agreement in terms of which Econet Wireless Global Limited agreed to supply Econet Wireless (Private) Limited with telecommunications equipment worth US$93.8 million. Kingdom Meikles Africa Limited Extra ordinary General Meeting approved the demerger of Kingdom Financial Holdings Limited and Meikles Africa Limited. The impact of the demerger on the interests of the Group are to be assessed.40 APPROVAL OF FINANCIAL STATEMENTS The financial statements were approved by the Board of Directors and authorised for issue on 28 July 2009. Econet Wireless Holdings Limited Annual Report 2009 60
  • 63. Econet continued to set the pace for the tele-communications industry in Zimbabwe. Ourrevenue increased and we strengthened ourPosition in key customer segments. Supplementary Information Shareholders and Other Information Consolidated Balance Sheet 62 Consolidated Income Statement 63 Shareholder Analysis 64 Financial Diary 65 Notice to Members 66 Corporate Information and Advisory 68 Our Strategic Business Partnerships 69 Detachable Proxy Form for Annual General Meeting Econet Wireless Holdings Limited Annual Report 2009 61
  • 64. Supplementary InformationFor the year ended 28 February 2009Consolidated Balance SheetAs at 28 February 2009All figures in US$ 2009ASSETSProperty, plant and equipment 134 442 629Deferred taxation 3 047 094Investments 13 300 351Current assets 25 585 296Total assets 176 375 370EQUITY AND LIABILITIESEQUITYShare capital -Non-distributable reserve 67 022 489Distributable reserves 16 339 768Accumulated loss (2 212 137)Attributable to equity holders of the parent 81 150 120Minority interest 5 662 042Total shareholders equity 86 812 162LIABILITIESDeferred taxation 40 429 314Interest-bearing debt 9 055 965Current liabilities 40 077 929 89 563 208Total equity and liabilities 176 375 370 Econet Wireless Holdings Limited Annual Report 2009 62
  • 65. Consolidated Income StatementFor the year ended 28 February 2009All figures in US$ 2009Revenue 87 942 516Cost of sales and external services (18 851 090)Gross profit 69 091 426Other income 1 673 907Employee costs (3 840 937)Other operating costs-Administration (14 204 967)-Marketing and sales (3 965 720)-Network costs (7 954 002)-Other costs (14 241 683)Earnings before interest, taxation and depreciation 26 558 024Depreciation and amortisation (18 448 625)Impairment of investment in associate (3 028 442)Profit from operations 5 080 957Equity accounted earnings (1 115 329)Finance income 705 765Finance costs (1 601 194)Profit before monetary adjustment 3 070 199Taxation (5 147 563)Loss for the year (2 077 364)Attributable to:Equity holders of the parent (2 212 137) Minority interest 134 773 (2 077 364)SIGNIFICANT RATIOSLoss per share-basic (0.01)Loss per share-diluted (0.01) Econet Wireless Holdings Limited Annual Report 2009 63
  • 66. Shareholders AnalysisFor the year ended 28 February 2009 SHAREHOLDERS ANALYSIS AS AT 28 FEBRUARY 2009 NUMBER OF % OF TOTAL ISSUED % OF TOTAL SHAREHOLDERS SHAREHOLDERS ORDINARY SHARES SHARE CAPITAL SIZE OF SHAREHOLDING 0 - 100 2 923 37.79 112 939 0.12 101 - 200 1 443 19 182 587 0 201 - 500 1 210 15.65 361 933 0.38 501 - 1,000 699 9.04 475 254 0.5 1,001 - 5,000 846 10.94 1 786 719 1.87 5,001 - 10,000 182 2.35 1 245 855 1.31 10,001 - 50,000 244 3.15 5 220 001 5.47 50,001 - 100,000 65 0.84 4 551 162 4.77 100,001 - 500,000 84 1.09 15 576 063 16.33 500,001 - 1,000,000 19 0.25 13 275 905 13.91 1,000,001 - 10,000,000 19 0.25 52 620 268 55.15 10,000,001 - 0 0 - 0 Total 7 734 100 95 408 686 100 CLASS OF SHARES % OF TOTALTOP SHAREHOLDERS CLASS “A” ORDINARY TOTAL SHARE CAPITALEconet Wireless Global Limited 73 098 819 73 098 819 43.64Econet Wireless Global Limited 4 489 249 4 489 249 2.68Old Mutual Life Assurance Company Zimbabwe Limited 8 912 085 8 912 085 5.32Austin Eco Holdings Limited - NNR 4 868 204 4 868 204 2.91Old Mutual Zimbabwe Limited 4 688 204 4 688 204 2.80T.S. Masiyiwa Investments (Private) Limited 3 344 325 3 344 325 2.00Ramtell Investments (Private) Limited 2 832 350 2 832 350 1.69Eco Pavilion Holdings Limited - NNR 2 494 766 2 494 766 1.49Northunderland Investments (Private) Limited 2 287 140 2 287 140 1.37Fed Nominees (Private) Limited 2 264 840 2 264 840 1.35Renaissance Securities Trading Limited - NNR 2 083 333 2 083 333 1.24Datvest (Private) Limited 1 778 626 1 778 626 1.06First Mutual Limited 1 481 000 1 481 000 0.89First Mutual Life - Shareholders 1 303 672 1 303 672 0.78TN Asset Management Nominees 1 248 258 1 248 258 0.75Pearl Properties (2006) Limited 1 158 403 1 158 403 0.69Ljon Investments (Private) Limited 1 127 117 1 127 117 0.67Stanbic Nominees (Private) Limited 1 061 764 1 061 764 0.63Hellikop Investments (Private) Limited 1 031 847 1 031 847 0.62Other 45 942 455 45 942 455 27.42 73 098 819 95 408 686 169 252 579 100 Econet Wireless Holdings Limited Annual Report 2009 64
  • 67. Financial Diary28 August 2009 Eleventh Annual General Meeting of Shareholders, Econet Park, HarareSeptember 2009 Interim press results, analyst briefing and Interim dividend record dateOctober 2009 Interim dividend payment28 February 2010 Financial year endApril 2010 Preliminary financial press results, analyst briefing and dividend record dateMay 2010 Twelfth Annual Report 2010 to be published and dividend paymentJune 2010 Twelfth Annual General Meeting of Shareholders, Econet Park, Harare Econet Wireless Holdings Limited Annual Report 2009 65
  • 68. Notice to MembersNotice is hereby given that the Eleventh Annual General Meeting, of the members of Econet Wireless Holdings Limited, will be held in thestaff canteen, at the registered office of the Company at Econet Park, 2 Old Mutare Road, Msasa, Harare, Zimbabwe, on Friday, 28 August2009, at 10.00 a.m. for the following purposes:Ordinary BusinessTo consider and adopt the following resolutions:1. Financial Statements To receive and adopt the financial statements for the year ended 28 February 2009, together with the reports of the directors and auditors thereon.2. Dividends To confirm the interim dividend of ZW$3 220.73 cents per share recommended by the directors for the half year ended 31 August 2008.3. Election of Directors To re-elect Messrs, J.G.B. Pattison, T. Nyambirai and S.T. Masiyiwa as directors of the Company. In accordance with Article 81 of the Companys Articles of Association, Messrs, J.G.B. Pattison, T. Nyambirai and S.T. Masiyiwa will retire by rotation at the Companys Annual General Meeting and, being eligible, offer themselves for re-election. Confirmation of the appointment of Dr J. Myers: Dr J. Myers was appointed to the Board on 27 May 2009. He will retire at the next Annual General Meeting in terms of Article 89.2 of the Company’s Articles of Association.4. Directors remuneration To approve the fees paid to the directors for the year ended 28 February 2009.5. Auditors To approve the auditors’ remuneration for the previous year and to consider reappointing Messrs Deloitte & Touche as auditors for the current year.6. Special Business To consider and if thought fit, to adopt, with or without amendment, the following Resolution:6.1 Change of the name of the Company As a Special Resolution That subject to the approval of the Registrar of Companies the name of the Company be changed from Econet Wireless Holdings Limited to Econet Wireless Zimbabwe Limited.6.2 Share Buy-Back As an Ordinary Resolution That the directors be authorised to purchase, at a price not higher than a price equivalent to 12 times the net asset value per share, provided the repurchases are not made at a price greater than 5% above the weighted average of the market value for the securities for the five business days immediately preceding the date of repurchase, the Companys own ordinary shares up to a maximum of ten percent of the issued ordinary shares at the date of the Annual General Meeting, for the purpose of holding the said shares as treasury assets. That a capital redemption reserve fund, appropriated out of revenue reserves standing from time in the books of the Company, be created: and further, that his authority expires at the next Annual General Meeting, provided it shall not extend beyond 15 months from the date of the resolution. Econet Wireless Holdings Limited Annual Report 2009 66
  • 69. Notice to Members7. Any Other Business To transact such other business as may be transacted at an Annual General Meeting.NOTE:A member of the Company entitled to attend and vote at this meeting is entitled to appoint a proxy to speak and, on a poll, vote in his / herstead.A proxy need not be a member of the Company.Proxy forms should be forwarded to reach the office of the transfer secretaries at least 48 hours before the commencement of the meeting.By order of the BoardC.A. BANDAGROUP COMPANY SECRETARY Econet Wireless Holdings Limited Annual Report 2009 67
  • 70. Corporate Information and AdvisoryIncorporated in the Republic of ZimbabweCompany registration number 7548/98Registered Office Principal Bankers Legal Advisors to the CompanyEconet Park, 2 Old Mutare Road African Export-Import Bank Limited Kantor and Immerman,Msasa World Trade Centre, Macdonald HouseHarare 1191 Corniche EL-Nil 10 Selous AvenueZimbabwe Cairo 11221 Harare Egypt ZimbabweTelephone: +263-4-486121/6+263-91-222 500 TN Bank Limited Mtetwa and NyambiraiFax:+263- 4-486120 2ndh Floor, Legal PractitionersE-mail: info@econet.co.zw 101 Union Avenue Building 101 4th Floor, 101 Union Avenue Building 101Website: www.econet.co.zw Kwame Nkrumah Avenue Kwame Nkrumah Avenue Harare HarareCompany Secretary Zimbabwe ZimbabweCharles Alfred BandaEconet Park, 2 Old Mutare Road Kingdom Bank Limited Registrars and Transfer SecretariesMsasa 3rd Floor, Karigamombe Centre First Transfer Secretaries (Private) LimitedHarare 53 Samora Machel Avenue 4th Floor, Goldbridge NorthZimbabwe Harare Zimbabwe Eastgate Cnr. Sam Nujoma Street/Auditors Renaissance Merchant Bank Limited Robert Mugabe WayDeloitte & Touche 8th Floor, Karigamombe Centre HarareChartered Accountants (Zimbabwe) 56 Samora Machel Avenue ZimbabweKenilworth Gardens Harare1 Kenilworth Road ZimbabweHighlandsHarareZimbabwe Econet Wireless Holdings Limited Annual Report 2009 68
  • 71. Our Strategic Business Partnership AFREXIMBANK The opportunities in the market have made it imperative to broaden our relationship with key partners. This has enabled the business to deliver value to our stakeholders and has promoted accelerated growth. Econet Wireless Holdings Limited Annual Report 2009 69
  • 72. Proxy Form for theAnnual General MeetingFor the Eleventh Annual General Meeting of the Company to be held at Econet Park, 2 Old Mutare Road, Msasa, Harare, Zimbabwe,on Friday, 28 August 2009, at 10.00 a.m. by hand to: The Group Company Secretary Econet Wireless Holdings Limited, No. 2 Old Mutare Road, Msasa, Harare, Zimbabwe. or by post to: The Group Company Secretary Econet Wireless Holdings Limited, P.O Box BE 1298 Belvedere, Harare, ZimbabweI/We.................................................................................................................................................................................................Being the registered holder/s of..........................................................................................................................................................Ordinary shares in Econet Wireless Holdings Limited do hereby appoint-:1.............................................................................................................................................................................or failing him/her2.................................................................................................................................................................................or failinghim/her the Chairman of the Annual General Meeting, as my/our proxy to act for me/us at the Eleventh Annual General Meeting of theCompany which will be held at Econet Park, 2 Old Mutare Road, Msasa, Harare to vote for me /us on my/ our behalf or to abstain fromvoting. IN FAVOUR OF AGAINST ABSTAIN1. Adoption of 2009 Annual Financial Statements together with the reports of the Directors and Auditors2. Approval of dividend recommended by the Companys Directors3. Appointment of Directors4. Approval of Directors remuneration5. Appointment of Auditors and approval of their remuneration6.1 Name change6.1 Renewal of share buy-backs authority(Kindly tick where appropriate.)Signature of Shareholder ................................................................................. Date......................................................................PLEASE NOTEIf the address on the envelope of this letter is incorrect, please fill in the correct details below and return to the Secretary.Name...............................................................................................................................................................................................Address.................................................................................................................................................................................................................................................................................................................................................................................................... Econet Wireless Holdings Limited Annual Report 2009
  • 73. Explanatory notes to resolutions for Annual General Meeting1. Shareholders may insert the name of a proxy or the name of two alternative proxies of the shareholders choice in the space provided, with or without deleting “the Chairman of the Annual General Meeting’, but such deletion must be initialed by the shareholder . The person whose name appears first on the form of proxy and whose name has not been deleted shall be entitled to act as proxy to the exclusion of those whose names follow.2. The authority of a person signing proxy under a power of attorney or on behalf of company must be attached to the proxy unless that authority has already been recorded by the Company Secretary or waived by the Chairman of the Annual General Meeting.3. Forms of proxy must be lodged at or posted to be received at the registered office of the Company Secretary, Econet Park, 2 Old Mutare Road, Msasa, Harare, Zimbabwe, not less than 24 hours before the time of the meeting.4. The completion and lodging of this form of proxy shall not preclude the relevant shareholder from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms therefor should the shareholder wish to do so.5. The Chairman of the Annual General Meeting may accept a proxy form which is completed and /or received other than in accordance with these instructions, provided that he is satisfied as to the manner in which a shareholder wishes to vote.6. Any alteration or correction to this form must be initialed by the signatory/signatories. Econet Wireless Holdings Limited Annual Report 2009
  • 74. www.econet.co.zw