A LEADING securities firm Morgan & Co has sounded a cautionary note for Econet Wireless Zimbabwe, warning that its investment in Liquid Telecommunications Holdings (LTH) may be poised for a decline in value.
The projected downturn was attributed to an expected migration of customers from Liquid Telecom Zimbabwe, a subsidiary of LTH, Starlink, a global outfit that was recently licenced to operate in Zimbabwe.
Morgan & Co predicted an erosion of market share and revenue as a result of the new dynamics.
Econet exchanged its 5% stake in Liquid Telecom Zimbabwe for a stake of an equivalent value of US$135 million in LTH in 2018.
The investment was valued at US$115 million as at February 28, 2024 and accounted for 16% of Econet's total assets value, the report stated.
“Liquid's sister company (Econet) could be affected by Starlink, albeit marginally,” the researchers said in their latest market intelligence report.
“From a balance sheet perspective, Econet could see its investment in Liquid Telecommunications Holdings lose some value because of an anticipated shift in some customers from LTH's subsidiary Liquid Telecom Zimbabwe to Starlink.
“Starlink's impact on Liquid Telecom Zimbabwe could ripple into the fair value of LTH and, in turn, Econet’s US$115 million stake in LTH.”
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From an income statement perspective, Morgan & Co indicated that Starlink will likely cut into the portion of Econet's data revenue - an alternative to fixed voice over internet protocol (VoIP) offerings.
Data's contribution to Econet's total revenue has steadily increased from 27% in the financial year 2019 (FY19) to 35% in FY24.
“That said, Econet's mobile network coverage in Zimbabwe remains unparalleled with an 8,3% share of mobile voice traffic and a 78% share of mobile data traffic in Zimbabwe,” the firm said.
“Further, the impact on Econet's data traffic will be impacted to the extent that Starlink enables mobile/on-the-go connectivity as well as its ability to navigate the local macroeconomic environment.”
Starlink is a satellite internet network that provides low cost, high speed internet access to remote locations around the world. Unlike terrestrial based fibre internet, Starlink uses a router to connect to a network of over 6 250 low-earth orbit satellites and the low capital outlay underpins its relatively low cost.
It boasts standard upload and download speeds of five to 10 megabits per second (Mbps) and 25 to 100 Mbps respectively, which are much better than its competition in Zimbabwe, according to the Speedtest Global Index.
However, Starlink's latency, which is the delay in time it takes for data to transfer across a computer network, of 25-60 milliseconds (ms) is higher than Zimbabwe's average fixed broadband latency of 15ms.
The fixed VoIP market comprises five players and Liquid has historically held the largest piece of the cake.
Starlink's relatively low price of US$50 per month for unlimited internet connectivity significantly undercuts its local industry peers, which offer limited and slower connectivity for the same price.
For example, Liquid is currently marketing the WibroniX Speedplus Platinum USD promotion package, which offers 100GB and a bonus 100GB with speeds of up to 10Mbps for US$50, according to the company's website.
Starlink's entrance into Zimbabwe marks its 16th activation on the African continent.
