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Sep 2 2004

ZIMBABWE'S Econet Wireless Holdings Limited (EWHL) will let go of its recently acquired foreign asset, a holding in Botswana's Mascom Wireless (Mascom), should proposals tabled under the reorganisation of Strive Masiyiwa's octopus-like empire go through.

The proposals, which will see EWHL ceding its 14 percent interest in Mascom, acquired less than a year ago after a bitter fight with minorities, come as Masiyiwa prepares his convoluted Econet firms for a multi-billion-dollar tie-up with South Africa's Allied Technologies (Altech).

Mascom contributed 26 percent to EWHL's inflation-adjusted attributable earnings of $53.3 billion in equity earnings.

EWHL announced yesterday that the Botswana-registered Econet Wireless Group (EWG), made up of Masiyiwa's TSMI, Econet Wireless International (EWI) employee share trust and the Econet Wireless Holdings Trust, which warehouses EWHL's interests in all Econet's foreign businesses, had made a cash offer for the acquisition of the 14 percent Mascom stake.

This transaction, though, would be subject to the usual shareholder, Zimbabwe Stock Exchange and exchange control approvals.

Details of the cash offer were not available yesterday, but it should run into several billions of dollars.

EWHL's deal with Mascom was valued at $20.8 billion in September last year, but the value of the underlying asset has grown over the year, as has its subscriber base, which has expanded by 26 percent.

Some analysts said that the latest move, especially as it comes not too long after EWHL took equity in Mascom, was probably at the instigation of Altech, which is viewed as a necessary cash-rich partner to help finance the Econet group's international expansion.

"I think Altech bargained for more assets to be brought on board, but the whole issue remains unclear at the moment," said one analyst.

EWHL's Mascom transaction, concluded late last year, saw the group's founder Masiyiwa shoring up his shareholding from 26.1 percent to 60 percent in exchange for participation in the lucrative Botswana operation.

Minorities had vigorously opposed the transaction, alleging that the valuation was steeped in Masiyiwa's favour.

EWHL directors, on the other hand, insisted the deal was fair and that the foreign asset would be valuable in terms of availing foreign currency earnings to the company.

Indeed, at the end of Mascom's financial year in December 2002, EWHL raked in P2.6 million (about $3 billion) in dividends. The company can now retain the entire earnings, under new reserve bank of Zimbabwe measures on foreign investments held by Zimbabwean corporates and individuals.

However, EWHL, which was previously unable to accept its shareholding in the holding company for the Econet group's foreign assets due to an exchange control deadlock, will assume a 23.08 percent shareholding in the new company to result from the Altech deal.

EWHL chairman Tawanda Nyambirai has said the company will also get dividend income from the new firm.

"The EWH Trust will hold an effective interest, in the new company, of 23.08 percent. While it must be stressed that EWH is not a shareholder in EWG, it will be entitled to dividend income from the shares held by the EWH Trust according to the decisions of the trustees," Nyambirai said.

The JSE Securities Exchange-listed Altech was reported to have completed the due diligence exercise on EWI in June.

The transaction, which now solely awaits the approval of the South African Reserve Bank, has been altered from its original form.

Lesotho Telecom, in which EWI has a 70 percent stake, has been dropped from the deal because of stringent subscriber threshold regulations enforced by the authorities.

However, the loss of the Lesotho asset is likely to be offset by the roping in of Telikom Papua New Guinea and the proposed Mascom transaction.

EWHL group chief executive officer Masiyiwa, who is also EWG's chief executive, was unavailable for comment.