Marketing Cautionary Warning to Econet Over Liquid Technologies Investment

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Morgan & Co, a leading securities firm, has raised concerns regarding Econet Wireless Zimbabwe’s investment in Liquid Telecommunications Holdings (LTH), predicting a potential decline in value due to increasing competition from Starlink, a newly licensed global satellite internet provider.

In its latest report, Morgan & Co points to a likely migration of customers from Liquid Telecom Zimbabwe, a subsidiary of LTH, to Starlink, which could significantly erode market share and revenue for Liquid Telecom. As of February 28, 2024, Econet’s investment in LTH is valued at approximately US$115 million, accounting for about 16% of the company’s total asset value.

Econet originally exchanged a 5% stake in Liquid Telecom Zimbabwe for a stake worth US$135 million in LTH in 2018. The firm’s recent market intelligence suggests that the shift in customer preference towards Starlink could diminish the fair value of LTH, thereby impacting Econet’s holdings.

From an income perspective, the report emphasizes that Starlink’s entry could adversely affect Econet’s data revenue, which has seen steady growth—from 27% of total revenue in the 2019 financial year to 35% in FY24.

Despite these potential challenges, Econet continues to hold a strong position in the Zimbabwean market, with an 8.3% share of mobile voice traffic and a commanding 78% share of mobile data traffic. Its extensive mobile network coverage could help cushion some impacts from Starlink’s competition.

Starlink distinguishes itself with low-cost, high-speed internet access via over 6,250 low-earth orbit satellites, offering competitive upload and download speeds ranging from 5 to 10 Mbps and 25 to 100 Mbps, respectively. However, its latency of 25-60 milliseconds is higher than the average fixed broadband latency of 15 ms in Zimbabwe.

With a pricing strategy of US$50 per month for unlimited internet, Starlink undercuts local competitors, including Liquid Telecom, which currently offers a promotional package of 100GB of data for the same price but with slower speeds.

As Starlink launches in Zimbabwe, marking its 16th activation across Africa, the competition in the telecommunications sector intensifies, raising concerns for established players like Econet and Liquid Telecom.

Source: Newsday