Econet AR 2011

8/15/2019 Econet AR 2011

1/75

experience a wholenew world

8/15/2019 Econet AR 2011

2/75

“Behold I make all things new” Revelations 21 v 5 (KJV)

8/15/2019 Econet AR 2011

3/75

A world of endless possibilities. This is a world

where data, voice and video coverage serve our

different but often concurrent communication

needs.

Experience a whole new world

Econet Wireless Zimbabwe Limited Annual Report 2010 1

8/15/2019 Econet AR 2011

4/75

experience a wholenew world

2 Econet Wireless Zimbabwe Limited Annual Report 2010

Econetworld. A strong brand to drive our data offering.

Econetworld comes to life as the data portal offering the latest

news, music, sports and entertainment among many exciting

features.

www.econe two r l d . c o . zw

GPRS EDGE 3G 4GPRS EDGE 3G 4G

Contents

3

4

6

8

10

12

14

16

17

18

23

62

Financial Highlights

Organisational Vision

Board of Directors

Econet Corporate Profile

Chairman's Statement to the Shareholders

Chief Executive Officer’s Operations Review

Corporate Social Investment

Directors’ Report

Directors’ Responsibility for Financial Reporting

Corporate Governance

Financial Statements

Supplementary Information

Detachable Proxy Form for Annual General Meeting

8/15/2019 Econet AR 2011

5/75

Financial Highlights


3 500 000

subscribers

Subscribers (thousands)

Connected Capacity201020092008200720062005

450

250

3 500

1 200

654

640

2010SUMMARY (US$)

We have delivered a solid performance due to our significant investment in

network equipment. The frontiers of communication have been expanded.

Everyone, everywhere, now connected. A new world has been created.

Over 3.5 million people are now talking.

TRADING RESULTS

Total Revenue

- Cellular network operations

- Other services

Earnings before interest, taxation, depreciation, impairment and amortisation

Profit before taxation

Profit attributable to shareholders

Cash generated from operations

Capital expenditure

Share Performance

Basic earnings per share (US$)

Basic diluted earnings per share (US$)Market price per share 28 February 2010 (US cents)

Number of shares in issue at 28 February 2010

Market capitalisation at 28 February 2010 (US$)

Ratios

Return on shareholders' equity

Shareholders' equity

Debt to shareholders' equity

347 092 651

15 684 321

179 285 617

148 122 147

113 209 756

129 909 998

160 148 716

0.66

0.66485

163 786 300

794 363 555

89%

165 485 596

75%

8/15/2019 Econet AR 2011

6/75

Our Vision

Our Mission

To provide telecommunications to all the people of Zimbabwe.

To serve Zimbabwe by pioneering, developing and sustaining reliable,

efficient and high-quality telecommunications of uncompromising

world-class standards and ethics.

Organisational Vision

OUR VALUES

Pioneering

Professionalism

Personal

The values we hold in common are:

We are a company committed to finding the best way forward in the fast moving and highly competitive technology

field. To remain the leader in the field, we shall relentlessly pursue innovative solutions and constantly grow our

knowledge base, with an uncompromising passion for excellence.

In everything we do, both within Econet and in the community, we always work in a customer and objective-oriented

manner with clearly defined goals, in terms of quality of service. In all our professional areas and at all levels, we willcarry out our duties skillfully and diligently.

Internally we will always remember that we are a company made up of individuals. These people are the Company.

Each one is an intrinsically valuable member of the organisation, irrespective of their gender, race or position. We will

always show concern for each other in an atmosphere that is open and stimulates personal development, job

satisfaction and a sense of responsibility. We believe in working in teams, in effective and confident co-operation, in

environments where honesty, praise, constructive criticism and fair reward have their place.

Who we are inside the Company shall reflect who we are externally. Our relationship with our customers will enthuse

with warmth and a genuine desire to meet their needs. We will reach out to customers in a holistic and organic way

that makes them true stakeholders in Econet Wireless.

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.

4 Econet Wireless Zimbabwe LimitedAnnual Report 2010

8/15/2019 Econet AR 2011

7/75

With the introduction of 3G, we have entered a new world of communication,

where the mobile phone has now become more than just a tool for

communication. It has become a gateway for the transmission of essential,

possibly life-saving information.

Econet Wireless Zimbabwe LimitedAnnual Report 2010 5

8/15/2019 Econet AR 2011

8/75

T. Nyambirai

Chairman

S. T. Masiyiwa

Executive

C. Fitzgerald

Non-Executive

D. Mboweni

Chief Executive Officer T.P. Mpofu (Mrs)

Non-Executive

Board of Directors

As at 28 February 2010


8/15/2019 Econet AR 2011

9/75

K.V. Chirairo

Finance DirectorA. N. H. Eastwood

Non-Executive


J. G. B. Pattison

Executive J. Myers

Non-Executive

P.J. Campbell

Non-Executive

8/15/2019 Econet AR 2011

10/75

Econet Corporate Profile

ECONET WIRELESS ZIMBABWE LIMITED

SUBSIDIARIES

Econet Wireless (Private) Limited

EW Capital Holdings (Private) Limited

Pentamed Investments (Private) Limited

Data Control and Systems (1996) (Private) Limited T/A Ecoweb

Transaction Payment Solutions (Private) Limited

Econet Wireless Zimbabwe Limited (EWZL) is the holding company of businesses involved in cellular operations, provision of internet access and transaction processing services. EWZL, which is listed on the Zimbabwe Stock Exchange (ZSE), is Zimbabwe's

leading technology company. It is one of the largest quoted companies in terms of market capitalisation, and directly and indirectly

employs in excess of 1 500 staff.

Econet Wireless (Private) Limited is EWZL's cellular network operator, with a subscriber base of 3 500 000 as at 28 February 2010.

EW Capital Holdings (Private) Limited is EWZL's investment vehicle through which the Group holds a variety of investments,

carefully selected with the twin objectives of growing earnings and preserving value for shareholders.

EWZL through wholly owned Pentamed Investments (Private) Limited, holds 69% of Mutare Bottling Company (Private) Limited

(inclusive of a 6% shareholding in the form of convertible instruments).

Ecoweb is an internet service provider in Zimbabwe, offering broadband and dial-up services to both corporate and individual

customers. It has a presence in all major cities and towns and has embarked on an extensive fibre optic project throughout

Zimbabwe.

The company is a leading provider of financial transaction switching, point of sale and value-added services, that exploit the

convergence of banking, information technology and telecommunications. The company provides local and international financialinstitutions and telecommunications operators access to cutting edge technology to enhance customer service, in partnership with

one of the world's leading manufacturers of smart card-based point-of-sale systems.


8/15/2019 Econet AR 2011

11/75

We have delivered solid performance as a result of our strong brands.

The launch of econetworld has enriched the user experience and created

a whole new world of endless possibilities.


8/15/2019 Econet AR 2011

12/75

Chairman’s Statement to the Shareholders

INTRODUCTION

INVESTMENT REVIEW

OPERATIONS REVIEW FINANCIAL PERFORMANCE

located in Bulawayo and the other The Econet brand is synonymous with two in Harare. Close to 200 baseinnovation, perseverance and a relentless

stations were commissionedpursuit of excellence. Econet Wireless aims during the same period. Althoughto remain the undisputed leader in the the network upgrade resulted intelecommunications market in Zimbabwe. service disruptions, this exercise The increase from 1.2 million to the current 4 was necessary to improve networkmillion subscribers is a firm testimony of that quality and performance. Econetintent. has now established itself as the

network with the widest coverage Telecommunications is a key contributor to

as illustrated by the coverage mapeconomic development because it provides

below (diagram 2).more efficient and effective access to

information, business partnerships and Data services through GPRS andmarkets. The country's mobile penetration EDGE were extended to all areasrate improved from below 15% to about where Econet has coverage. 3G

40% largely as a result of Econet's capacity, which was initiallyinvestment in network equipment. restricted to Harare, is being

deployed to all other major cities,

resort towns and the main ports of In the financial year ended 28 February 2010

entry. The business expects theequipment worth US$ 160.1 million was

additional capacity to bepurchased. The planned investment of US$

commissioned before the300 million in the next financial year, is a

commencement of the FIFA 2010clear demonstration of the strong belief by

Soccer World Cup which is beingthe business in the future prospects of the

hosted by South Africa in June/JulyZimbabwean economy. The value added

2010.statement for the financial year ended 28

February 2010 is reflected below (diagram 1). Econet launched a state of the art

highly integrated Call Centre

Of the total value added for the financial year solution. The equipment is capableended 28 February 2010 of US$ 362.8of offering multimedia options to

million, over U$ 63.3 million, representingaccess the call centre i.e. telephone, email, SMS, faxing and

17% of the value added was distributed to the Government in theinternet for Econet's customers’ convenience. Customer care

form of various taxes and levies. US$ 244.5 million, whichpersonnel are being trained in key service competences in order

represents 68% of the value created was reinvested in theto improve the service excellence.

business to fund long term assets and working capital

expenditure. 13% was paid back to the providers of finance by Econet was recognized as a leading telecommunicationsway of capital and interest repayments as well as dividends. The operator in Africa by being awarded the prize for The Best Voicebusiness invested US$ 7.0 million in various social investment Operator in Southern and Eastern Africa by Africa Telecom Peopleprogrammes, representing 2% of the value added. Arguably, this Awards of France. In the same period Otherways Managementis the largest social investment spend by any corporate entity in Consultants of France awarded the business the Global Award forZimbabwe. Perfection, Quality and Ideal Performance.

Econet's switching capacity increased with the commissioning of The Group's performance includes the results of its subsidiarytwo more switch centres during the financial year ended 28 companies. The Group's operating subsidiaries are MutareFebruary 2010. The business now has three switch centres; one is


68%

Paid to Government

Value invested insocial programmes

Invested in funding long-termassets and working capital

17%13%

2%

Paid to providers of Finance

Diagram 1 Diagram 2

COVERAGE MAP FOR EXISTINGNETWORK FEBRUARY 2010

VALUE ADDED STATEMENT

GPRS, EDGE & GSM NATIONAL

COVERAGE

3G COVERAGE(WHEN OUTOF 3GCOVERAGE YOU WILLSTILLBE COVEREDVIA GPRS)

TAWANDA NYAMBIRAICHAIRMAN OF THE BOARD

8/15/2019 Econet AR 2011

13/75Econet Wireless Zimbabwe LimitedAnnual Report 2010 11

Bottling Company (Private) Limited which is in the beverages sector; Transaction Payment Solutions (Private) Limited which provides

electronic payment solutions and Data Control and Systems (1996) (Private) Limited t/a Ecoweb, an internet access provider.

Revenue for the year ended 28 February 2010 was US$ 362.8 million. This revenue performance was achieved as a result of the significant

investment in network infrastructure. This investment enabled the business to increase the subscriber base by 233% from 1.2 million

subscribers to the current 4 million subscribers. The Group achieved an EBITDA of US$ 179.3 million, a margin of 49% of revenue. The

network investment resulted in the statement of financial position totals increasing by 116% to US$ 392.7 million as at 28 February 2010.

The Group changed its functional currency from the Zimbabwe Dollar to the United States Dollar with effect from 1 January 2009.

Having considered the recommendations of the Zimbabwe Stock Exchange, the Zimbabwe Accounting Practices Board and the Public

Accountants and Auditors Board, the Group has opted not to show certain comparative information. The audit opinion on the Group's

financial statements is modified in respect of the non-disclosure of this comparative information.

In line with the Group's broad corporate social investment policy, the Group continued to play a significant role in the community through

its social investment vehicles.

Over 50 000 economically disadvantaged students have been assisted through the Group's Corporate Social Investment initiatives to

attain educational qualifications at pre-tertiary level. During the period under review two students, who were exposed to the International

Baccalaureate programme, were awarded scholarships to study at Harvard University. The Group assisted with funding which resulted in

opening of the University of Zimbabwe Medical School. As a result, 275 students were able to progress with their studies. The Group's

scholarship fund continues to assist over 360 students with impeccable academic credentials by funding their tertiary education.

The network expansion drive continues to be the main focus of the business in order to increase subscriber capacity and network quality.

To meet the needs of increasingly complex financial reporting and risk management requirements, the Group has commenced the

implementation of Oracle Financials, a best of breed Enterprise Resource Planning system that is used extensively by telecommunications

operators. The Group will also commission a new fraud and revenue assurance system during the upcoming financial year in order to

improve revenue assurance.

I would like to extend my sincere appreciation to our customers for their loyalty and for bearing with us during the network upgrade. I

would like also to extend my appreciation to all our business partners and various stakeholders who have assisted us in achieving this

performance. I applaud management and staff for the sterling work they have done during the financial year just ended. To the Board, I

extend my gratitude for the vision and insight that has resulted in the growth of the business.

T. NyambiraiCHAIRMAN OF THE BOARD

28 May 2010

FINANCIAL REPORTING

CORPORATE SOCIAL INVESTMENT

OUTLOOK

APPRECIATION

*4.0 Million

* Subscribers as at 31 March 2010

US$ 160.1 million US$ 362.8 million

US$ 0.66 US$ 0.1489%

Basic earnings per share Total dividend per shareCAPEX/EBITDA

Highlights

Subscribers Investmentin long term assets

Revenue

8/15/2019 Econet AR 2011

14/75

Chief Executive Officer’s Operations Review

INTRODUCTION OPERATIONS REVIEW

FINANCIAL HIGHLIGHTS

Mobile telephones have created many The increase in switching capacity

innovations that were otherwise not possible. and the installation of a significant

This has transformed the lives of many number of base stations has

people especially in developing countries impro ved the competitive

where fixed line technology was too advantage of the business. The

expensive to deploy over large geographical rapid pace of deployment of base

areas. It is in these previously unreached station infrastructure that has been

communities that mobile telephony will have experienced will continue unabated

the greatest social and economic impact. It is as the business consolidates its

the intention of the Group to extend its market leadership position. We

coverage to allow more people to benefit anticipate that optimisation of the

from access to telecommunications. network, which will be executed in

the next financial year, will increase

The level of investment that the Group has operational efficiency and reliability.

embarked on is unprecedented in Zimbabwe. The business is in the process of

A facility of US$ 93.9 million from Econet implementing a generator

Wireless Global enabled the business to deployment strategy which will

increase its subscriber base to about 3.5 minimize service disruptions

million subscribers and its share of the resulting from the unavailability of

mobile market to 73% as at 28 February electrical power.

2010. The financial performance achieved

during the year under review is a result of this

Revenue for the 12 months endedsignificant investment in infrastructure.

28 February 2010 was US$362.8

New loan facilities are in the process of being million and the Earnings before,negotiated. These additional funds will result Interest, Tax, Depreciation,

in the expansion of the existing capacity and Impairment and Armortisation

the improvement of the quality of the network. were US$ 179.3 million, a margin of 49%. The Group's basic

earnings per share for the period was US$0.66. The largest driver

of profitability was the mobile business which contributed US$

347.1 million, representing 96% of the overall Group revenues.

Most of the Group's earnings are cash earnings, reflecting a high

quality earnings profile.

Net cash generated from operating activities was US$ 106.9

million. Most of the internally generated cash flows were

reinvested in the business. The debt to equity ratio of 75% is

reflective of the level of leverage required to fund mobile

businesses and is not dissimilar to other network operators in the

region.

Interest costs at US$ 4.9 million, represented 2.7% of the Earnings

before, Interest, Tax, Depreciation, Impairment and Armortisation

margin. This reflects a high interest cover. Average interest costs

for the period relative to net debt were less than 6% per annum.

The Group has been able to leverage on established relationships

with debt providers and its shareholding structure to facilitate

lending at lower risk adjusted rates of interest.


The level of investment that the Group has

embarked on is unprecedented in

Zimbabwe. A facility of US$ 93.9 million

from Econet Wireless Global enabled the

business to increase its subscriber base to

about 3.5 million subscribers and its share of

the mobile market to 73% as at 28 February

2010. The financial performance achieved

during the year under review is a result of

this significant investment in infrastructure.

DOUGLAS MBOWENICHIEF EXECUTIVE OFFICER

8/15/2019 Econet AR 2011

15/75


INNOVATIONS

INTERNAL TRANSFORMATION

DISTRIBUTION

OUTLOOK

The introduction of mobile and fixed broadband services remains an area of strategic focus for the business. The Group embarked on a fibre

network roll out project that will result, ultimately, in a connection to the undersea cable. This will bring the benefits of high speed

broadband to Zimbabwe in a cost effective and efficient manner. The base station configurations will also take advantage of the availability

of fibre technology to improve quality and reliability of the network.

The rapid growth that the business has experienced needs to be well managed in order to ensure effective utilization of resources and to

deliver appropriate shareholder return. The planned investment in revenue and fraud assurance as well as enterprise risk planning systems

will enhance the Group's ability to leverage the value of its people and systems to enhance profitability as the business continues to grow.

Econet increased its distribution and retail presence through the opening of new shops in Gweru, Chitungwiza and Chinhoyi. In addition,

the business deployed point-of-sale terminals in partnership with Transaction Processing Solutions (Private) Limited in order to achieve cost

effective and efficient airtime distribution. The company has also strengthened its relationship with key strategic partners thereby

increasing the number of retail outlets selling airtime.

The improvement of the customer service experience, through staff training, information systems enablement and more efficient processes

is a key strategic imperative. With a mobile penetration rate of 40%, there is still significant demand for communication services in

Zimbabwe. The Group will continue to invest and focus on product development and service innovation to continue to excite our

customers and build strong brand loyalty.

D. Mboweni

Chief Executive Officer

28 May 2010

8/15/2019 Econet AR 2011

16/75


THE JOSHUA NKOMO SCHOLARSHIP FUND continues to fund the nation’s

most gifted students.


8/15/2019 Econet AR 2011

17/75

We remain firm in our belief that a company's success cannot be

During the year, Econet also came up with a comprehensivemeasured on financial performance alone. Our success also lies in

Environmental and Waste Management Policy. Econet believesthe positive transformation of our communities.environmental awareness is now more than just a factor of social

We believe that every business has a responsibility beyond its basic responsibility, but rather a business imperative.

responsibility to its shareholders; it is a responsibility to the people

The Joshua Nkomo Scholarship Fund continued with its valuableof the communities in which it serves.

work in the provision of funding to the nation's most gifted

As a pioneering company, we are moving beyond corporate social students. There was fresh focus on supporting maths and science

responsibility to social innovation. Econet believes that technology students as part of the Group's contribution to the development

that does not transform lives is irrelevant. We must provide a of technology in Zimbabwe.

service that contributes meaningfully to the improvement of the

lives of members of the communities that we serve.

The Capernaum Trust was established in 1996 to transform the

lives of orphaned children in economically disadvantagedOur social role is therefore constantly being reviewed in order to

situations. The Trust continued its work to offer hope andremain relevant to our communities.inspiration to orphaned children. In the face of greater demand

for welfare intervention, the Trust's work continued in the

In 2008, our social responsibility role took on a more direct and provision of scholarships, food packs and life skills training to over

urgent role. Under our health and welfare programme, Econet 26 000 orphans nationwide.

provided financial and logistical support to teams of dedicated

health workers that were involved in fighting the cholera epidemic Our involvement goes beyond the provision of material support,

that affected the country during the latter part of 2008. as the trust runs a deliberate and planned programme designed to

empower beneficiaries with life skills and activities to restore their

We employed our wide airtime distribution network to spread self-esteem and groom them into inspired leaders.

awareness by printing anti-cholera messages on our recharge

cards.

Our involvement in fighting the cholera crisis opened our eyes to Econet is convinced that HIV and AIDS have the potential to waste

the urgent need to make our intervention in health care more valuable trained human resources and reduce productivity. We

focused. Econet therefore established the National Healthcare continue to recognise the huge impact of HIV and AIDS on the

Trust Zimbabwe in December 2008. wellbeing of our employees. This includes their welfare outside

the workplace, where staff face the burden of committing effort The Trust's immediate task was the procurement of essential and resources to care and provide for family members. Policiesmedicines and equipment needed for delivery of basic healthcare and structures therefore continue to be followed to address this

services, and the provision of key support in the areas of concern. Econet Wireless continues to provide anti-retroviral

communication. drugs for the infected employee and other members of their

immediate family. Through the “Live 2 Love” programme, theRather than merely reacting to crisis, the Trust will implement a Company continued to encourage open dialogue among staff onmore proactive and sustained strategy for the rehabilitation and HIV/AIDS. By encouraging open debate on HIV and AIDS, we helplong-term maintenance of Zimbabwe's health sector. The Trust remove the stigma attached to HIV and AIDS and increase accessseeks to build and maintain capacity within the health sector in to critical information on the pandemic.Zimbabwe.

Environment

Joshua Nkomo Scholarship Fund

The Capernaum Trust

National Healthcare Trust Zimbabwe (NHTZ)

HIV/AIDS POLICY


8/15/2019 Econet AR 2011

18/75

Directors’ Report

The directors have pleasure in presenting their twelfth Annual Report and the Audited Financial Statements of Econet Wireless Zimbabwe Limited and itssubsidiaries for the year ended 28 February 2010. In the report “Group” refers to Econet Wireless Zimbabwe Limited and its subsidiary companies.

Following the approval by members at the Annual General Meeting held on 30 September 2009 and subsequent approval by the Registrar of Companies,the Company changed its name from Econet Wireless Holdings Limited to Econet Wireless Zimbabwe Limited. The change was with effect from 21 January2010.

The Group's principal activities remained the same during the year, that is, the provision of cellular services, provision of internet access services, transactionprocessing services and mobile banking services.

The Group also retained its investments in its subsidiaries companies, however, there were some changes in the level of investments in some of the entities.Where appropriate it also continued to oversee the management of these companies.

The Group's financial results and its activities during the year are adequately covered in the statements of the Chairman and the Chief Executive Officer.

An interim dividend of US$0.08 per share for the half-year ended 31 August 2009 was declared by the board at its meeting held on 23 September 2009.Shareholders were given the option of either receiving their interim dividend in cash or in the form of additional shares. The final dividend of US$0.06 will

be paid in cash.

The authorised share capital of the Group remained unchanged during the year. The issued share capital changed following the scrip dividend and theshare buy-backs and now stands at 163 786 300 shares made up of 73 069 615 Class “A” shares and 90 716 685 ordinary shares.

The movements in the reserves of the Group are shown in the Statement of Changes in Equity.

Messers D Mboweni and K V Chirairo will retire by rotation at the Group's Annual General Meeting and, being eligible, will offer themselves for re-election.Dr J Myers was appointed to the board on 27 May 2009. His appointment was confirmed at the Annual General Meeting held on 28 September 2009.

At the Annual General Meeting shareholders will be asked to approve payment of the directors' fees and the re-appointment of Directors.

Mr A H N Eastwood has expressed his wish to retire from the Board. He will not be standing for re-election at the next Annual General Meeting. The Boardwishes to express its deep appreciation to Mr A H N Eastwood for the long and valuable contribution he has made to the Company since his appointmentto the Board in January 2001.

The details of the Group's borrowing powers are set out in Note 35 to the financial statements.

The Group's pension fund scheme is administered by a Board of Trustees. The Trustees manage the assets of the pension fund, which are held separatelyfrom those of the Group. The assets and funds of the scheme are administered in accordance with the rules of the pension fund.

Commitment to the economic and social development of the country remained firmly in place during the year. The commitment finds its roots in theGroup's own commitment to Christian values and the Group's wish to uphold and improve the quality of life of the people of Zimbabwe. The Group's“Econet in the Community“ programme saw it continuing with its social investment initiatives in education, environmental matters, health and socialwelfare and religious organisations.

The Group does not , as a matter of policy, contribute to any political party.

Shareholders will be asked to approve the remuneration of the auditors for the year ended 28 February 2010.

Deloitte & Touche stepped down as the Group's auditors with effect from 30 October 2009, after having served the Group for ten years. Ernst & Youngwere duly appointed as the Group's auditors with effect from the same date.

By order of the Board

T Nyambirai D. Mboweni C A BandaCHAIRMAN OF THE BOARD CHIEF EXECUTIVE OFFICER GROUP COMPANY SECRETARY

28 May 2010

Change of name of Company

Principal Activities

Consolidated Results

Dividends

Share Capital

Reserves

Directors

Capital commitments

Interest of Directors

Funding requirements

Borrowing Powers

Pension Fund


Donations to Political Parties

Auditors

Details of the Group’s capital commitments are set out in note 36 of the financial statements.

Details of the interest of the directors in the ordinary shares of the company are detailed in note 24.5 of the financial statements.

The Group increased its interest bearing debt during the current financial year in order to finance its network expansion. Details of the Group's borrowingsare disclosed in note 28 of the financial statements.


8/15/2019 Econet AR 2011

19/75

Directors’ Responsibility For Financial Reporting

The directors are responsible for the preparation, integrity and fair presentation of the consolidated annual financial statements of

Econet Wireless Zimbabwe Limited ('the Group') and the company’s abridged annual financial statements.

The consolidated annual financial statements have been audited by the independent auditing firm Ernst & Young which was given

unrestricted access to all financial records and related data, including minutes of meetings of shareholders, the board of directors

and committees of the board. The directors believe that all representations made to the independent auditors during their audit

were valid and appropriate. The report of the auditors on the consolidated annual financial statements is presented on pages 25

and 26.

The consolidated annual financial statements for the year ended 28 February 2010 presented from page 27 to 61 have been

prepared using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board with

the exception that certain comparative information required by IAS 1 (Presentation of Financial Statements) has not been

disclosed in these financial statements for the reasons stated in note B1.2. The financial statements have been prepared in

accordance with the disclosure requirements of the Companies Act (Chapter 24:03). They are based on appropriate accounting

policies which have been consistently applied, as modified, where necessary, by the impact of new and revised standards. Theapplication of these accounting policies is supported by reasonable and prudent judgements and estimates. The going concern

basis has been adopted in preparing these annual financial statements. The directors have no reason to believe that the Group nor

the company will not be a going concern in the foreseeable future based on forecasts and available cash resources.

The directors are also responsible for the Group's system of internal controls. These are designed to provide reasonable, but not

absolute assurance as to the reliability of the consolidated and company abridged annual financial statements and to adequately

safeguard, verify and maintain accountability of assets. These controls are monitored throughout the group by management and

employees with the necessary segregation of authority and duties. Processes are in place to monitor internal controls to identify

material breakdowns and implement timely corrective action .

The consolidated annual financial statements were approved by the board of directors on 28 May 2010.

T Nyambirai D. Mboweni K.V. ChirairoCHAIRMAN OF THE BOARD CHIEF EXECUTIVE OFFICER FINANCIAL DIRECTOR

28 May 2010


8/15/2019 Econet AR 2011

20/75

The Group and its subsidiaries have continued to embrace the principles of good corporate governance in their business operations

and financial reporting. Transparency, responsibility and accountability as set out in the Principles for Corporate Governance in

Zimbabwe: Manual of Best Practice, the Cadbury Report of the United Kingdom and the King Reports of South Africa remainedpart and parcel of the Group's culture and way of doing business. The Group also retained its membership of the Institute of

Directors of Zimbabwe.

The Board membership stood at 10 during the year, consisting of 4 executive and 6 non-executive directors, with a wide range of

business and industry expertise. A non-executive director chairs the Group's Board.

Appointment of the non-executive directors is on the basis of their skills and experience or expertise in their respective fields, the

ultimate objective being to have in place a variety of skills and experience on the Board. The non-executive directors are subject to

election by shareholders. All directors retire by rotation and stand for re-election as provided for in the Company's Articles of

Association.

The Board of Directors is accountable for the Group's welfare and general outlook and assumes overall responsibility for the Group's

strategic development. It provides leadership and sound judgement in directing the Group to achieve its objectives and sustainable

prosperity and in the process, uphold the interests of the Group's shareholders and stakeholders. The Board formulates key policies

and has responsibility for the following specific areas:

review and approval of the Group's strategic business plans, incorporating operating and capital expenditure budgets;

setting of corporate objectives and performance targets;

review and approval of major acquisitions and disposals;

reviewing the share capital of the Group and subsidiaries and recommending alteration thereof;

reviewing annual financial statements and significant changes in accounting policies; and

monitoring and reviewing the Group's overall performance.

In the execution of its responsibilities the Board delegates certain specific responsibilities to various committees and the boards of

subsidiary companies. It reviews and ratifies the appointment of directors to the boards of its subsidiary companies.

To facilitate the exercise of their responsibilities all directors have unrestricted access to management, including the Group

Company Secretary, and to the Group's records and other information as and when they so require. The directors also have

authority, where necessary, to seek independent professional advice at the Group's expense.

The following are the directors who served during the year:

Mr T Nyambirai (Chairman), Mr S T Masiyiwa, Mr P J Campbell, Mr R Chidembo (resigned 27 May 2009), Mr K V Chirairo, Mr A H NEastwood, Mr C Fitzgerald, Mr D Mboweni, Mrs T P Mpofu, Mr J G B Pattison, Mr Z M T Wazara (resigned 27 May 2009) and Dr J

Myers (appointed 27 May 2009).

As is the practice, directors are required each year to indicate in writing whether they have any material interest in any contract of

significance with the Company or any of its subsidiaries, which could give rise to a conflict of interest. Directors are also required to

disclose their other business interests. With the exception of Mr T Nyambirai, none of the directors had a material interest in any

contract of significance to which the Group was a party during the year, other than their service contracts.

Mr Nyambirai is the Group Chief Executive Officer of TN Holdings Limited, which is one of the Group's financial advisors. He is also a

partner in Mtetwa and Nyambirai Legal Practitioners, a firm that provides legal services to the Group. During the year the Group

established a business relationship with TN Bank Limited which is a subsidiary of TN Holdings Limited.

Details of related party transactions are disclosed in note 30.

THE BOARD OF DIRECTORS

Composition and appointment

Accountability and delegated functions

Rights

Directors' names

Directors' interests

Corporate Governance


8/15/2019 Econet AR 2011

21/75

S.T. Masiyiwa 3 N/A 3 N/A

T. Nyambirai 3 N/A N/A N/A

P.J. Campbell 3 5 3 3

A.H.N. Eastwood 3 4 3 3

C. Fitzgerald 3 5 3 3

K.V. Chirairo 3 5 3 3

D. Mboweni 3 5 3 3

T.P. Mpofu 3 4 3 3

J. Myers 3 N/A 3 N/A

J.G.B. Pattison 3 N/A 3 N/A

BOARD

3

AUDIT ANDREMUNERATION

COMMITTEE

5

INVESTMENTSCOMMITTEE

3

LOANSCOMMITTEE

3Meetings held

The Group Company Secretary

Directors' remuneration

BOARD COMMITTEES

Audit and Remuneration Committee

Investments Committee

All directors have access to the advice and services of the Group Company Secretary.

The remuneration of directors and senior executives is reviewed by the Audit and Remuneration Committee. The Committee is

constituted of non-executive directors, with executive directors sitting in as ex-officio members, and is chaired by a non-executive

director.

The Board has appointed a number of committees to which it has delegated some of its responsibilities. The committees operate

within defined terms of reference set by the Board.

The attendance record of the members of the Econet Wireless Zimbabwe Limited Board and Board Committee meetings is set out

below.

The Audit and Remuneration Committee of the Group and its subsidiary companies is constituted of non-executive directors and

chaired by a non-executive chairman. Two executive directors sit in as ex-officio members. The Committee's overall responsibility is

to advise the Board on financial management and other governance issues and to facilitate Board decisions on matters relating to

financial policy and control. It meets not less than four times a year.

The Committee ensures the Group delivers meaningful and transparent reporting of its financial results. The Committee works in

conjuction with the Group's external auditors to ensure financial discipline within the Group and the observance by the Group of

International Financial Reporting Standards.

Members of the Audit and Remuneration Committee are: Mr P J Campbell (Chairman), Mr K V Chirairo, Mr A H N Eastwood, Mr C

Fitzgerald, Mrs M Harris, Mr D Mboweni and Mrs T Mpofu.

The Investments Committee is responsible for the review of the Group's investments and making recommendations on these to the

Board for consideration and approval. It evaluates potential investments, expansion and development of the network and new

products. It also examines the technical aspects of acquisitions, mergers and reconstructions.

Members of the Investment Committee are: Mr S T Masiyiwa (Chairman), Mr C Fitzgerald, Mr P J Campbell, Mr A H N Eastwood, Mr

K V Chirairo, Mrs M Harris, Mr D Mboweni, Mrs T P Mpofu, Mr J G B Pattison and Dr J Myers.


8/15/2019 Econet AR 2011

22/75

Corporate Governance (continued)

Loans Committee

INVESTOR RELATIONS

EMPLOYMENT AND EQUITY PRACTICES

INSIDER TRADING

INTERNAL CONTROLS

The Committee reviews the Group's major loans obligations, both local and foreign, and puts forward recommendations on the

servicing of these obligations.

The members of the Committee are: Mr A H N Eastwood (Chairman), Mr P J Campbell, Mr K V Chirairo, Mr C Fitzgerald, Mrs M

Harris, Mr D Mboweni and Mrs T P Mpofu.

Effective communication with the public and shareholders continues to remain a primary policy of the Group. The Group's

executive meets with shareholders and investment analysts at least bi-annually after the release of the Group's results.

The Group's Annual Report and other corporate publications are available on the corporate website www.econet.co.zw.

At the Group's Annual General Meeting each substantial issue is put to the meeting for discussion and /or noting. The meeting is

also presented with, and asked to adopt, the Group's annual financial statements and directors' report.

If and whenever necessary the board calls for Extraordinary General Meetings to deal with specific issues. The levels of proxy votes

lodged for and against each resolution are disclosed at each meeting, together with details of abstentions.

A communications system is in place within the Group through which employees are kept informed of the Group's financial

performance and matters affecting their welfare. Communications are done through regular briefings, presentations, electronic

mailings and the corporate website.

The Group is an equal opportunity employer. All applications for employment are given full and fair consideration; this includes

applications from disabled persons. Career development and promotion of disabled people is, as far as possible, the same as that

of other employees.

The development of skills and expertise remains a major policy of the Group. Secondment of skilled and professional employees to

overseas and regional operations takes place on a regular basis.

Observance of the highest standards of ethical behaviour by the directors and the Group's employees remains one of the pillars of

the Group's culture. The policy ensures that business practices are conducted with the highest levels of integrity and

professionalism.

The Group complies with the Zimbabwe Stock Exchange listing rules in relation to transactions by directors and employees in

securities issued by the Group. Directors and employees or their nominees or members of their immediate family are prohibited

from dealing in the Group's securities at anytime when they are in possession of unpublished, price-sensitive information.

T he Group operates a closed period prior to the publication of its interim and annual results, during which directors and employees

of the Group may not deal in securities of the Group. In terms of policy, directors and employees who wish to transact in the shares

of the Group, even outside of the Group's “closed or blocked period”, are required to obtain the clearance of the Chairman.

Internal controls comprise methods and procedures adopted by management to achieve the objective of safeguarding assets,

preventing and detecting errors and fraud, ensuring the accuracy and completeness of accounting records and the preparation of

accurate reliable financial statements. The Board confirms that the internal control procedures have been in place throughout the

year to identify and eliminate the stated risks.


8/15/2019 Econet AR 2011

23/75

The Group has an internal audit function which monitors, and reports on, the internal control systems. The head of the function

attends the meetings of the Audit and Remuneration Committee at which he submits a report on the systems and risks that would

have been identified.

The Group's Audit and Remuneration Committee confirms the independence of the Auditors, Ernst & Young, who are engaged by

the Group for audit-related services. Whenever necessary the Group calls upon the services of other firms to assist with non-audit

management consultancy work.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the

foreseeable future. Accordingly they have prepared the financial statements on the basis of the Group as a going concern.

By order of the Board

INDEPENDENCE OF AUDITORS

GOING CONCERN

T Nyambirai D. Mboweni K.V. ChirairoCHAIRMAN OF THE BOARD CHIEF EXECUTIVE OFFICER FINANCIAL DIRECTOR

28 May 2010


8/15/2019 Econet AR 2011

24/7522 Econet Wireless Zimbabwe Limited Annual Report 2010

TRANSACTION PAYMENT SOLUTIONS has made it possible for electronic payments to be more

widely accepted. 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.

8/15/2019 Econet AR 2011

25/75

Econet Wireless Zimbabwe Limited

2010 Financial Statements

Certificate by Company Secretary

Report of the Independent Auditors

Consolidated Statement of Comprehensive Income

Consolidated Statements of Financial Position

Company Statements of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

Supplementary Information

Detachable proxy form for the Annual General Meeting

24

25

27

28

29

30

31

32

62


8/15/2019 Econet AR 2011

26/75


CHARLES A. BANDA

GROUP 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 May 2010

Certificate by Company Secretary

8/15/2019 Econet AR 2011

27/75

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF ECONET WIRELESS ZIMBABWE LIMITED

We have audited the accompanying financial statements of Econet Wireless Zimbabwe Limited as set out on pages 27 to 61,

which comprise the Company and consolidated statements of financial position at 28 February 2010, and the consolidated

statement of comprehensive income, the consolidated statement of changes in equity and consolidated statement of cash

flows for the year then ended, and the notes to the financial statements, which include a summary of significant accounting

policies and other explanatory notes.

Directors' Responsibility for the Financial Statements

The company's directors are responsible for the preparation and fair presentation of these financial statements in accordance

with International Financial Reporting Standards ( IFRS ) and in the manner required by the Companies Act (Chapter 24:03).

This responsibility also includes: designing, implementing and maintaining internal controls relevant to the preparation and

fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and

applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. The

Directors have elected to comply with the guidance in the Joint Media Statement On The Impact On Financial Reporting as a

Consequence of The Change In Functional Currency ( 'the Financial Reporting Guidance') issued jointly by the Public

Accountants and Auditors Board (“PAAB”), the Zimbabwe Accounting Practices Board (“ZAPB”) and the Zimbabwe Stock

Exchange (“ZSE”) in July 2009.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in

accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and

plan and perform the audit to obtain reasonable assurance on whether the financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material

misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal controls relevant to the entity's preparation and fair presentation of the financial statements in order to

design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the

financial statements.

Our audit report has been modified in the manner in which we report on the compliance of these financial statements with

provisions of the Companies Act (Chapter 24:03) and the relevant Statutory Instruments (SI 33/99 and SI 62/96), as set out in

the guidance and recommendations on audit reports issued jointly by the Public Accountants and Auditors Board, the

Zimbabwe Stock Exchange and the Zimbabwe Accounting Practices Board in July 2009.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our modified opinion.

25

A member firm of Ernst & Young Global Limited

8/15/2019 Econet AR 2011

28/75

26

Ernst & Young

Chartered Accountants (Zimbabwe)

28 May 2010

Harare, Zimbabwe

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF ECONET WIRELESS ZIMBABWE LIMITED

(continued)

Basis for modified opinion on the comparative consolidated statement of comprehensive income, consolidated

statement of changes in equity and consolidated statement of cash flows

Non-compliance with IAS 1: Presentation of Financial Statements

The Directors have not presented all the required comparative information as required by IAS 1 because they believe the

information will be misleading for reasons stated in note B1.2.

Modified opinion

In our opinion, except for the effects of non-compliance with IAS 1 (Presentation of Financial Statements) the consolidatedfinancial statements, in all material respects; give a true and fair view of the financial position of the Company and Group and

the results of the Group operations of Econet Wireless Zimbabwe Limited at 28 February 2010 in accordance with International

Financial Reporting Standards.

Report on other legal and regulatory requirements

In our opinion, the financial statements have not been properly prepared in compliance with the disclosure requirements of

the Companies Act (Chapter 24:03) and Statutory Instruments (SI 33/99 and SI 62/96) due to the inability to comply with IAS 1.

In our opinion, the Company has complied, in all material respects with the Financial Reporting Guidance. This guidance was

issued jointly by the Public Accountants and Auditors Board, the Zimbabwe Stock Exchange and the Zimbabwe Accounting

Practices Board to assist preparers of financial statements in converting their financial statements from Zimbabwe Dollars into

their new functional currency in a manner that is consistent with the principles of International Financial Reporting Standards,

in as far as is practicable, in the Zimbabwean economic environment, at the date of the change of functional currency.

Emphasis of matter

Without further modifying our opinion, we draw your attention to note S1, which details the significant judgments and

estimation uncertainties with respect to the values of property, plant and equipment as at 28 February 2009. These

judgements and estimates relate to the Directors' valuation of property, plant and equipment. This may result in significant

variations in values depending on factors and assumptions used.

8/15/2019 Econet AR 2011

29/75


Consolidated Statement of Comprehensive Incomefor the year ended 28 February 2010

All figures in US$ 2010NOTES

Revenue 2 362 776 972

Cost of sales and external services sold (72 469 513)

Gross profit 290 307 459

Other income 1 186 993

Foreign currency gains 7 166 097

291 660 549

Operating costs

-General administrative expenses (82 595 132)

-Marketing and sales expenses (16 496 550)

-Network expenses (10 977 630)

-Other expenses (2 305 620)

Profit before interest, taxation, depreciation, impairment and amortisation 179 285 617

Depreciation and amortisation (21 110 647)

Impairment of property, plant, equipment and investment property (7 496 290)

Profit from operations 3 150 678 680

Finance income 5 472 885

Finance costs 6 (4 903 297)

Share of profit of associate 16 1 089 844

Fair value gain recognised on disposal of interest in former associate 16 722 715

Profit on disposal of investment in associate 61 320

Profit before taxation 148 122 147

Taxation 8 (34 912 391)Profit for the year 113 209 756

Other comprehensive income

Exchange differences arising on translation (88 700)

Reversal on revaluation (128 000)

Fair value gain on available-for-sale investments 5 076 133

Taxation effect of other comprehensive income 1 565 692

Other comprehensive income for the year, net of taxation 4 6 425 125

Total comprehensive income for the year 119 634 881

Profit for the year attributable to:

Equity holders of Econet Wireless Zimbabwe Limited 114 645 631

Non-controlling interests (1 435 875)

113 209 756

Total comprehensive income attributable to:

Equity holders of Econet Wireless Zimbabwe Limited 121 132 041

Non-controlling interests (1 497 160)

119 634 881

Basic profit per share (dollars) 9 0.66

Headline profit per share (dollars) 9 0.66

Diluted basic profit per share (dollars) 9 0.66

Diluted headline profit per share (dollars) 9 0.66

8/15/2019 Econet AR 2011

30/75

8/15/2019 Econet AR 2011

31/75

28 May 2010

T. NYAMBIRAI

CHAIRMAN OF THE BOARD

D. MBOWENI

CHIEF EXECUTIVE OFFICER

K.V. CHIRAIRO

FINANCE DIRECTOR

Company Statements of Financial Positionas at 28 February 2010



ASSETS

Non-current assets

Property, plant and equipment 260 000 260 000

Investment in subsidiaries 14.1 34 576 487 34 576 487

Total non-current assets 34 836 487 34 836 487

Current assets

Intercompany balances 14.2 485 277 3 830 687

Loan to subsidiary 14.2 1 783 179 604 099

Bank and cash 19 116 -

Total assets 37 124 059 39 271 273

EQUITY AND LIABILITIES

EQUITY

Equity attributable to owners of EWZL

Total capital and reserves (4 408 184) 39 271 273

LIABILITIES

Current liabilities

Intercompany liabilities 14.2 41 531 149 -

Other payables 1 094 -

Total equity and liabilities 37 124 059 39 271 273

The principal information has been stated in the consolidated financial statements; therefore no statement of cashflows, statement

of changes in equity or statement of comprehensive income is provided for the company.

8/15/2019 Econet AR 2011

32/75


for the year ended 28 February 2010

Consolidated Statement of Changes in Equity

All figures in US$ Total

Non-controlling

interest

Equityholders

of the parentOther

reserves

Sharecapital and

Share premium

Balance at 28 February 2009 - 85 057 986 85 057 986 3 813 755 88 871 741

Comprehensive income

Profit for the year - 114 645 631 114 645 631 (1 435 875) 113 209 756

Other comprehensive income

Exchange differences arising on translation - (88 700) (88 700) - (88 700)

Reversal on revaluation - (66 715) (66 715) (61 285) (128 000)

Fair value gain on available-for-sale investments - 6 641 825 6 641 825 - 6 641 825

Total other comprehensive income - 6 486 410 6 486 410 (61 285) 6 425 125

Total comprehensive income - 121 132 041 121 132 041 (1 497 160) 119 634 881

Transactions with equity holders of Econet

Wireless Zimbabwe Limited

Scrip dividend 12 861 502 (12 861 502) - - -

Cash dividend - (507 198) (507 198) - (507 198)

Share buy-back - (42 513 828) (42 513 828) - (42 513 828)

Total transactions with equity holders

of Econet Wireless Zimbabwe Limited 12 861 502 (55 882 528) (43 021 026) - (43 021 026)

Balance at 28 February 2010 12 861 502 150 307 499 163 169 001 2 316 595 165 485 596

Other reserves- consist of reserves arising from the revaluation of property and available-for-sale financial assets, all components of total

comprehensive income net of distributions to the equity holders of the Company and a currency translation reserve which arises from the

change in functional currency that occurred from Zimbabwe dollars to United States dollars in January 2009. Where a revalued financial

asset is sold, the portion of the reserve that relates to that financial asset is effectively realised and recognised in the statement of

comprehensive income. Where a revalued financial asset is impaired, the portion of the reserve that relates to that financial asset is also

recognised in the statement of comprehensive income.

8/15/2019 Econet AR 2011

33/75


Consolidated Statement of Cash Flowsfor the year ended 28 February 2010


Operating Activities

Cash generated from operations 29.1 129 909 998

Taxation paid 29.2 (23 016 872)

Net cash from operating activities 106 893 126

Investing activities

Finance income 261 049

Acquisition of intangible assets (1 761 291)

Acquisition of available-for-sale financial assets (4 402 026)

Acqusition of held-to-maturity investments (1 709 909)

Purchase of property, plant and equipment (160 148 716)

Proceeds on disposal of property, plant and equipment. 980 428

Proceeds on disposal of associate 292 535Net cash used in investing activities (166 487 930)

Financing activities

Finance costs (4 903 297)

Dividends paid (507 198)

Share buy-back (42 513 828)

Proceeds from borrowings 171 027 962

Repayment of borrowings (55 135 693)

Net cash from financing activities 67 967 946

Net increase in cash and cash equivalents 8 373 142

Cash and cash equivalents at the beginning of the year 5 550 606

Cash and cash equivalents at the end of the year 29.3 13 923 748

8/15/2019 Econet AR 2011

34/75


Notes to the Consolidated Financial Statementsfor the year ended 28 February 2010

A GENERAL INFORMATION

A.1

A.2

B BASIS OF PREPARATION

B.1 Statement of Compliance

B 1.1 Non-disclosure of certain comparative information

B 1.2 Reasons for non-disclosure of certain comparative information

B1.3 Disclosure of comparative information for the statement of financial position

The Company was incorporated in Zimbabwe on 4 August 1998 and its main operating subsidiary on 23 August 1994. The address of itsregistered 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. The ultimate holding Company for the Group is Econet Wireless Global

Limited.

These financial statements are presented in United States dollars being the currency of the primary economic environment in which the

Group operates. The Group changed its functional currency from Zimbabwe dollars on 1 January 2009.

Except where specific reference is made to "the Company", the notes disclosed in the financial statements pertain to the Group.

The basis of preparation of these financial statements is International Financial Reporting Standards

The financial statements have been prepared in conformity with International Financial Reporting Standards, promulgated by the

International Accounting Standards Board (IASB), which includes standards and interpretations approved by the IASB as well as

International Accounting Standards and Standing Interpretations Committee (SIC) interpretations issued under previous constitutions

(IFRS’s), with the exception that certain comparative information has not been disclosed as required by IAS 1 (Presentation of Financial

Statements). The comparative information that has not been disclosed pertains to the statements below:

Statement of comprehensive income;

Statement of cash flows; and

Statement of changes in equity.

The economic environment prevailing during the previous financial year deteriorated to such an extent that the accounting fraternity in

Zimbabwe, as represented by the Public Accountants and Auditors Board (PAAB), the Zimbabwe Accounting Practices Board (ZAPB) andthe Zimbabwe Stock Exchange (ZSE) arrived at the conclusion that compliance with International Financial Reporting Standards was no

longer possible under the prevailing economic circumstances, at that time, for entities that applied the Zimbabwe Dollar as their

functional currency. This decision was arrived after considering the following issues:

(i) the indices used for financial reporting in Zimbabwe’s hyperinflationary economy ceased to be published after July 2008 because

prices could not be obtained for the basket of goods that was used to determine the general consumer price index as the majority of

formal sources of supply did not have the requisite goods that were required for input into the basket;

(ii) attempts to convert Zimbabwean Dollars (ZWD) to other recognised currencies gave rise to unreliable and misleading results

because of the wide spread of exchange rates available in the economy;

(iii) attempts to determine ZWD fair values using present value/discounting models were severely hampered by inconsistent and

unrealistic discount (interest) rates giving rise to unreliable and misleading results;

(iv) the general level of price volatility was very high due to inefficiencies in the market resulting from shortages of goods as well as price

controls which rendered the normal function of market efficiencies redundant in determining fair price levels between willing buyers

and willing sellers; the Zimbabwe Stock Exchange (ZSE) did not operate from mid-November 2008 to mid-February 2009 which

meant that there were no ZWD market-observable prices.

The effects of these economic circumstances on the prior year financial information is considered to be material and pervasive to the

comparative information for the statement of comprehensive income, statement of changes in equity and the statement of cash

flows for that period. Therefore, the Directors have decided not to show comparative information for this period because it is

potentially misleading.

The Group changed its functional currency on 1 January 2009. This date coincides with the effective date that was approved by the

Exchange Control Authorities for the mobile business to charge for its services in United States Dollars. Subsequent to this approval,

general approval was given for all entities to trade in foreign currency on 29 January 2009. This means that by the time the Group

reported on 28 February 2009 all its assets and liabilities were denominated in a stable foreign currency. For this reason the Director's

believe that the comparative statement of financial position is a fair reflection of the financial position of the Group as at 28 February

2009. Therefore the Directors have presented comparative information for the statement of financial position.

8/15/2019 Econet AR 2011

35/75


C ADOPTION OF NEW AND REVISED STANDARDS

C.1 Standards and Interpretations effective in the current period- Adopted

C.2 Standards and interpretations issued but not effective- Not adopted

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 2009. The adoption of these

new and revised Standards and Interpretations did not have a material impact on the financial statements of the Group.

IFRIC 18: Transfers of assets from Customers (effective 1 July 2009)

IFRS 2 Share-based payment revised ( effective 1 January 2009) :The IASB issued an ammendment to IFRS which clarifies the definition

of vesting conditions and prescribes the treatment for an award that is cancelled. The group adopted this ammendment as of 1 January

2009. It did not have an impact on the financial position or performance of the Group.

IFRS 3 Business combinations (revised) and IAS 27 Consolidated and separate Financial statements ammended (early adopted):

The Group adopted the revised standard from 1 March 2009. IFRS 3 (revised) introduces significant changes in the accounting for

business combinations occuring after this date. Changes affect the valuation of non-controlling interest, the accounting for transactioncosts, the inital recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages.

IFRS 7 Financial instruments revised (effective 1 January 2009): The ammended standard requires additional disclosures about fair

value measurement and liquidity risk. Fair value measurements related to items recorded at fair value are to be disclosed by source of

inputs using a three level fair value hierachy, by class, for all financial instruments recognised at fair value. In addition, a reconciliation

between the beginning and ending balance for level 3 fair value measurements is now required as well as significant transfers between

levels in the fair value hierachy.

IFRS 8 Operating segments revised (effective 1 January 2009):IFRS 8 replaced IAS 14 (Segment Reporting) upon its effective date. The

group concluded that the operating segments determined in accordance with IFRS 8 are the same as the business segments previously

identified under IAS 14. IFRS 8 disclosures are shown in note 1.

IAS 1 Presentation of financial statements (effective 1 January 2009): The revised standard separates owner and non-controlling

changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in

equity presented in the statement of comprehensive income. The statement of comprehensive income, which is introduced in the

standard, presents all items of recognised income and expense, either in one single statement, or in two linked statements. The group has

elected to present one statement.

IAS 23 Borrowing Costs revised (effective 1 January 2009): The revised IAS 23 requires capitalisation of borrowing costs that are

directly attributable to the acquisition, construction or production of a qualifying asset. The Group's previous policy was to expense

borrowing costs as they were incurred. In accordance with the transitional provisions of the ammended IAS 23, the Group has adopted

the standard on a prospective basis. Therefore , borrowing costs are capitalised on qualifying assets with a commencement date on or

after 1 January 2009.

IAS 32 Financial instruments: Puttable Financial Instruments and obligations arising on liquidation (effective 1 January 2009):The

standards have been amended to allow a limited scope exception for puttable financial instruments to be classified as equity if they fulfil a

number of specified criteria. The adoption of these ammendments did not have any impact on the financial postition or the performance

of the Group.

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. These standards have not been early adopted as they do not have a material

effect on the financial statements.

IFRIC 9 Reassessment of Embedded Derivatives and IAS 39 Financial Instruments: Recognition and Measurement (effective for periods

ending on or after 30 June 2009).

IFRIC 16 (amended) Hedges of a Net Investment in a Foreign Operation (effective 1 July 2009).

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective 1 July 2009).

IFRS 1 First-time Adoption of International Financial Reporting Standards: Measurement of the cost of investments in subsidiaries, jointly

controlled entities and associates when adopting IFRS for the first time (effective1 July 2009).

IFRS 2 Share-based Payment: Group Cash settled Share based payment Transactions (effective 1 January 2010)IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (Revised). Effective from 1 July 2009.

IFRS 9: Financial Instruments (effective 1 January 2013).

IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (Revised). Effective from 1 July 2009.

IAS 7 Statement of Cash Flows: Classification of expenditures on unrecognised assets (effective 1 January 2010).

8/15/2019 Econet AR 2011

36/75


C ADOPTION OF NEW AND REVISED STANDARDS (Continued)

C.2 Standards and interpretations issued but not effective- Not adopted (Continued)

D.1 BUSINESS COMBINATIONS - IFRS 3 (REVISED)

At acquisition - measurement

At acquisition - measurement of goodwill (see also policy note F.1 below)

At acquisition - measurement of a non-controlling interest

Business combination achieved in stages

Acquisition of interests from non-controlling interest

Subsequent measurement

D.2 Basis of consolidation - IAS 27

IAS 17 Leases: Classification of leases of Land and buildings (effective 1 January 2010).IAS 36 Impairment of assets: Unit of accounting for goodwill impairment testing ( effective January 2010).IAS 39 Financial instruments: Recognition and Measurement- Eligible Hedged items (effective 1 July 2009).

The directors anticipate that all of the above Standards and Interpretations will be adopted in the Group's financial statements for theperiod commencing 1 March 2010 and that the adoption of the Standards and Interpretations will not have a material impact on thefinancial statements of the Group in the period of initial application.

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. Applying the acquisition method requires (a)identifying the acquirer; (b) determining the acquisition date; (c) recognising and measuring the identifiable assets acquired, the liabilitiesassumed and any non-controlling interest in the acquiree; and (d) recognising and measuring goodwill or a gain from a bargainpurchase.

The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for theacquisition of a business is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred orassumed, and equity instruments issued by the Group in exchange for control of the acquiree. For each business combination, the

acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’sidentifiable net assets. Acquisition costs incurred are expensed. The acquiree's identifiable assets, liabilities and contingent liabilities thatmeet the conditions for recognition under IFRS 3 (revised) are first assessed for appropriate classification and designation in accordancewith the contractual terms, economic circumstances and pertinent conditions as at the acquisition date and recognised at their fair valuesat 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.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in theacquiree is remeasured to fair value as at the acquisition date through profit and loss. Any contingent consideration to be transferred bythe acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent considerationwhich is deemed to be an asset or liability will be recognised in accordance with IAS 39 either in profit or loss or as change to othercomprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured until it is finally settled withinequity.

Goodwill arising on acquisition is recognised as an asset and initially is measured at cost, being the excess of the consideration transferred,excluding directly related expenditure, over the Group's interest in the net fair value of the identifiable assets, liabilities and contingentliabilities recognised less the non-controlling interest (measured at fair value or their proportion of the net asset) less the fair value of theacquirer’s previously held interest in the acquiree if it is a step acquisition. If, after reassessment, the Group's interest in the net fair value of

the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognisedimmediately in comprehensive income.

The non-controlling interest in the acquiree is initially measured at the non-controlling interest's proportion of the net fair value of assets,liabilities and contingent liabilities recognised.

In a business combination achieved in stages, the previously held equity interest in the acquiree is remeasured at its acquisition date fairvalue. Any resultant gain or loss is recognised in profit or loss. If a previously remeasurement gain or loss was recognised in othercomprehensive income, that gain or loss is recognised as if the previously-held equity interest had been disposed of.

Acquisitions of non-controlling interests in subsidiaries are accounted for as transactions between shareholders. There is noremeasurement to fair value of net assets acquired that were previously attributable to non-controlling interests.

Acquisitions or disposal of non-controlling interests in subsidiaries without a change in control are accounted for as transactions between

shareholders in equity. There is no remeasurement to fair value of net assets acquired that were previously attributable to non-controllinginterest.

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (itssubsidiaries) made up to the end of February of each year. For consolidation purposes, control is achieved where the Company has thepower to govern the financial and operating activities of an entity so as to obtain benefits from its activities.

Subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that suchcontrol ceases.

The results of subsidiaries acquired or disposed of during the year are included in the income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistentaccounting policies. If a subsidiary company uses different accounting policies from other group companies, then for consolidationpurposes the accounting policies and accounting treatment of that subsidiary are adjusted to be consistent with other group companies.

All intra-Group transactions, balances and income and expenses are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction.

Non-controlling interests in the net assets of consolidated subsidiaries (excluding goodwill) are identified separately from the Group'sequity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and thenon- controlling interests' share of changes in equity since the date of the combination. Losses applicable to the non-controlling interestare applied even if that results in a deficit in the balance of the non-controlling interest.

Notes to the Consolidated Financial Statements (continued)for the year ended 28 February 2010

8/15/2019 Econet AR 2011

37/75


D.3 Investments in subsidiaries

E INVESTMENT IN ASSOCIATES - IAS 28

At acquisition - initial measurement:

Subsequent measurement:

Associate losses

Intra-group transactions

F INTANGIBLE ASSETS- IAS 38

Recognition and measurement

F.1 Goodwill- IFRS 3

Impairment of goodwill

F.2 Internet licence

F.3 Project development costs

F.4 Impairment of other intangible assets

Investments in subsidiaries in the company financial statements are initailly recognised at cost. Subsequently the investments are carriedat cost less accumulated impairments.

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 jointcontrol 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. There are no investments in associates which are held-for-sale in these financialstatements.

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 forimpairment 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 atthe date of acquisition (i.e. discount on acquisition) is credited to profit and loss in the period of acquisition.

Investments in associates are carried in the statement of financial position at cost adjusted for post-acquisition changes in the Group’sshare of the net assets of the associate, less any impairment in the value of individual investments.

Losses of an associate in excess of the Group’s interest in that associate are not recognised. Additional losses are provided for, and aliability is recognised, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of theassociate.

Where a Group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest inthe relevant associate.

Intangible assets are identifiable non-monetary assets without physical substance. Intangible assets in these financial statementscomprise: Goodwill; and the cost of a Class 'B' Internet Access Provider licence held by subsidiary company Data Control and Systems(1996) (Private) Limited.

Intangible assets are recognised when (a) it is probable that future economic benefits will flow to the entity from the intangible asset, and(b) the cost of the intangible asset can be reliably measured.An intangible asset is initially measured at cost.

Goodwill arising on consolidation represents the excess of the cost of an acquisition over the Group's interest in the net fair value of theidentifiable 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 impairmentlosses.

Negative goodwill arising on acquisition represents the excess of the fair value of the net identifiable assets acquired over the cost of theacquisition. Negative goodwill in excess of the fair values of the non-monetary assets acquired is immediately recognised in profit or loss.

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.

For the purpose of impairment testing, goodwill is allocated to each of the Group's 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 morefrequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less thanthe carrying amount of the unit, then the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to theunit 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 is not reversed in subsequent periods.

Licence fees represent the cost of acquisition of a Class 'B' Internet Access Provider licence. The licence is amortised on a straight line basisover 8 years. The carrying amount of the licence is reviewed annually and written down for permanent impairment where it is considerednecessary.

Project development costs are recognised as an expense in the period in which they are incurred except where it is reasonably anticipatedthat these costs will be recovered through future commercial activity, in which case the costs are capitalised. Assessments of carryingvalues are done regularly and if there is an indication that the asset has suffered an impairment loss, an impairment is recognisedimmediately in profit or loss.

At each reporting date, the Group reviews the carrying amounts of its other intangible assets to determine whether there is any indicationthat those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in orderto determine the extent of the impairment loss (if any). Where a reasonable and consistent basis of allocation can be identified, corporateassets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generatingunits for which a

Econet AR 2011

Documents

Transcript of Econet AR 2011