Zimbabwe: Econet Wireless rated as the company with the highest growth potential

Mergers, Acquisitions and Financial Results

Econet Wireless has been rated as the telecommunications company with the highest growth potential in SubSaharan Africa (SSA), according to the latest Renaissance Capital report.

The fact that the penetration rate in Zimbabwe still falls far below the regional average means the country's largest mobile company has more potential for upside growth in value and earnings. According to the report, the sector's market capitalisation for Sub-Saharan Africa companies is expected to grow by over US$1 billion this year.

Econet is well placed to provide the largest chunk of this money. The market capitalisation for SSA operators currently stands at US$6,393 billion.

Econet is trading at EV/Subs (enterprise value over subscribers) of US$190.2 against an average of US$252.3 for three of its peers in the region - Celtel of Zambia, MTN of South Africa and Safaricom of Kenya.

It is also grossly undervalued, using the price earnings ration although its EV/EBITDA (enterprise value over earnings before interest, taxes, depreciation and amortisation) is almost in line with the regional average of US$4,50.

"We think investors should stick to markets with more favourable regulations, and stocks that pay high dividends.

"Econet is the highest growth stock in our SSA telecoms universe and provides exposure to a relatively healthy telecoms market," said the report.

Last year, Econet traded a volume of about 19 million shares valued at US$92 million or 23 percent of the total trades on the Zimbabwe Stock Exchange. The report, however, noted that voice revenues will remain under pressure over the next one and half years and recommended operators to expand in other telecoms segments.