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Nod for Econet mega-deal
The Financial Gazette
January 06, 2005

http://www.fingaz.co.zw/fingaz/2005/January/January6/7457.shtml

A MULTI-BILLION-DOLLAR transaction by Econet Wireless Holdings (EWH) to dispose of its stake in Botswana’s largest mobile network, Mascom Wireless, for US$14 million was approved by EWH shareholders at an extraordinary general meeting (EGM) held in Harare last Friday.

At the meeting, presided over by EWH chairman Tawanda Nyambirai, shareholders gave overwhelming support to efforts by Econet to raise funding without recourse to expensive local and foreign borrowing for its expansion through the disposal of the Mascom stake.

The deal, one of the largest transactions to be undertaken by a listed company on the Zimbabwe Stock Exchange, is expected to raise more than $85 billion in foreign currency at current auction rates, providing the much-needed hard currency to enable Econet Wireless Zimbabwe (EWZ) to expand its mobile network during 2005.

Under the transaction, EWH, the holding company of Zimbabwe’s largest mobile network operator, is disposing of its 14 percent stake in Mascom to UK-incorporated Econet Wireless Limited, which in turn is wholly owned by Econet Wireless Group, a company domiciled in Botswana, in which JSE Securities Exchange-listed telecommunications company Altech has acquired a 50 percent stake worth US$70 million (over Z$427 billion.)

The approval of the disposal of the Mascom stake comes barely a few days after Econet had concluded a major supply agreement with Ericsson South Africa to provide network equipment to enable the Zimbabwean mobile operator to add over 250 000 lines by June this year.

Econet Wireless Zimbabwe is currently battling to meet massive demand for its services, and to overcome congestion in certain parts of the country.

Once the expansion is completed, Econet intends to double its subscriber base by the end of the year.

The expansion will not result in any borrowings by the debt-averse Econet because it will utilise part of the proceeds from the disposal of the Mascom stake to pay for the equipment being procured from Ericsson, the sole supplier of Econet’s network since the company began operations in June 1998.

"EWZ has already invested in the upgrading and expansion of the switch and base station controllers, which has created capacity for additional subscribers. However, this investment is presently underutilised because of the need to procure, install and commission base stations. EWZ is unable to finance this expansion programme because of the foreign currency shortages the country is experiencing," Econet said in a statement to shareholders ahead of the EGM.

Meanwhile, Econet has welcomed the recent investment in the company by Altech, saying it has created a bigger telecommunications company that will be able to exploit market opportunities on the African continent, where there is still high demand particularly for mobile telecommunication services.

Econet said the focus of the enlarged entity would not necessarily be on the South African market, but in other African markets, where there is a huge annual growth rate of cellular subscribers, whose number is expected to rise to over 125 million within the next three years.

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