Mergers, Acquisitions and Financial Results

Econet Wireless Holdings Limited (EWHL), stands to rake in USD14 million from the proposed sale of its 14 percent stake in Botswana's Mascom Wireless.

EWHL founder and group chief executive officer Strive Masiyiwa told The Financial Gazette last week that the transaction, likely to come under shareholder scrutiny in November, would see the Zimbabwe operation getting a US$14 million boost for its network expansion.

"That transaction is very straightforward. The (Mascom) shares were owned by my family and were sold to EWHL. In fact, it was not a sale, but a reorganisation. The company (EWHL) will get US$14 million for that asset," Masiyiwa said, adding that the funds would go towards increasing EWHL's subscriber base.

"It is an opportunity to increase the subscriber base to about 400 000, which is double the current figures," Masiyiwa, who is on the verge of concluding a multi-billion-dollar deal with South Africa's Allied Technologies Limited (Altech), said.

EWHL's subscriber base grew by 20 percent in the first half of the year, to 173 606 subscribers by June, to consolidate its position as Zimbabwe's biggest mobile phone network.

Zimbabwean cellular phone companies have been hamstrung in their expansion plans by a chronic shortage of foreign currency. Over 90 percent of cellphone companies' costs are foreign currency- denominated.

The Econet Wireless Group (EWG), which warehouses the various international Econet companies Masiyiwa has established in the past five years, has entered into a joint venture agreement with Altech, a JSE Securities Exchange-listed technology group, to establish a multi- billion-dollar firm to explore the international telecommunications market.

Should EWHL successfully dispose of its Mascom stake, then EWG will effectively control 40 percent of the company, which operates Botswana's biggest mobile network and is that country's second largest company, after kimberlite giant, Debswana.

Masiyiwa indicated that the proposal could be presented before EWHL shareholders at the company's Annual General Meeting (AGM), scheduled for November.

"We are not in a big hurry. We will put the it on our AGM agenda in two months," Masiyiwa said.

The pioneering mobile phone technology mogul warded off spirited resistance from minorities last year, when he shored up his EWHL from 26.1 percent to 60 percent following a share swap that saw EWHL taking up the 14 percent interest Mascom.

Mascom has proved to be a shrewd investment for EWHL, contributing a quarter of the Zimbabwe Stock Exchange-listed group's attributable earnings of $53.3 billion in equity earnings in the past financial year.

However, the prospect of doubling its subscriber figures in Zimbabwe, where increased regulatory flexibility on tariff reviews has seen Average rate Per User (ARPU) figures growing five-fold, might be an attractive option, more so as EWHL is guaranteed dividend income from EWG, despite not being a shareholder.

The Econet Wireless Holdings Trust, which currently warehouses EWHL's interest in the foreign Econet operations, will have an effective 23 percent interest in the company to emerge from the merger of EWG and Altech.

EWHL chairman Tawanda Nyambirai has said that Louvre Trustees, trustees of EWH Trust, have decided that his company was entitled to dividend income from the shares held by the trust in EWG.

The Financial Gazette