News / National
Econet's investment in Liquid may be poised for a decline in value
20 Sep 2024 at 11:14hrs | Views
Morgan & Co, a prominent securities firm, has issued a cautionary warning to Econet Wireless Zimbabwe regarding its investment in Liquid Telecommunications Holdings (LTH). The firm anticipates a potential decline in the value of this investment due to increased competition from Starlink, a global satellite internet provider that has recently been licensed to operate in Zimbabwe.
The report suggests that the expected migration of customers from Liquid Telecom Zimbabwe, a subsidiary of LTH, to Starlink could lead to a significant erosion of market share and revenue for Liquid Telecom. Morgan & Co highlighted that Econet's investment in LTH, valued at approximately US$115 million as of February 28, 2024, represents about 16% of Econet's total asset value.
Econet initially exchanged a 5% stake in Liquid Telecom Zimbabwe for a stake worth US$135 million in LTH back in 2018. The firm's latest market intelligence report indicates that the shift in customer preference towards Starlink could have a ripple effect, diminishing the fair value of LTH and subsequently impacting Econet’s stake.
From an income perspective, Morgan & Co noted that Starlink's entry into the market may adversely affect Econet's data revenue, which has been growing steadily - rising from 27% of total revenue in the financial year 2019 to 35% in FY24.
Despite these challenges, Econet maintains a strong position in the market, boasting an 8.3% share of mobile voice traffic and a commanding 78% share of mobile data traffic in Zimbabwe. The firm’s extensive mobile network coverage remains unmatched, which could help mitigate some of the potential impacts from Starlink’s competition.
Starlink differentiates itself by providing low-cost, high-speed internet access through a network of over 6,250 low-earth orbit satellites. Its standard upload and download speeds, ranging from 5 to 10 Mbps and 25 to 100 Mbps, respectively, are competitive compared to existing offerings in Zimbabwe. However, its latency of 25-60 milliseconds is higher than the average fixed broadband latency of 15 ms in the country.
Starlink's pricing strategy, offering unlimited internet connectivity for US$50 per month, undercuts local competitors like Liquid Telecom, which currently offers a promotional package providing 100GB of data for the same price, albeit with slower speeds.
As Starlink enters the Zimbabwean market, it marks its 16th activation on the African continent, further intensifying competition in the telecommunications sector and prompting concerns for established players like Econet and Liquid Telecom.
The report suggests that the expected migration of customers from Liquid Telecom Zimbabwe, a subsidiary of LTH, to Starlink could lead to a significant erosion of market share and revenue for Liquid Telecom. Morgan & Co highlighted that Econet's investment in LTH, valued at approximately US$115 million as of February 28, 2024, represents about 16% of Econet's total asset value.
Econet initially exchanged a 5% stake in Liquid Telecom Zimbabwe for a stake worth US$135 million in LTH back in 2018. The firm's latest market intelligence report indicates that the shift in customer preference towards Starlink could have a ripple effect, diminishing the fair value of LTH and subsequently impacting Econet’s stake.
From an income perspective, Morgan & Co noted that Starlink's entry into the market may adversely affect Econet's data revenue, which has been growing steadily - rising from 27% of total revenue in the financial year 2019 to 35% in FY24.
Starlink differentiates itself by providing low-cost, high-speed internet access through a network of over 6,250 low-earth orbit satellites. Its standard upload and download speeds, ranging from 5 to 10 Mbps and 25 to 100 Mbps, respectively, are competitive compared to existing offerings in Zimbabwe. However, its latency of 25-60 milliseconds is higher than the average fixed broadband latency of 15 ms in the country.
Starlink's pricing strategy, offering unlimited internet connectivity for US$50 per month, undercuts local competitors like Liquid Telecom, which currently offers a promotional package providing 100GB of data for the same price, albeit with slower speeds.
As Starlink enters the Zimbabwean market, it marks its 16th activation on the African continent, further intensifying competition in the telecommunications sector and prompting concerns for established players like Econet and Liquid Telecom.
Source - newsday
