By Patience Gondo
ECONET Wireless Zimbabwe’s decision to voluntarily delist from the Zimbabwe Stock Exchange (ZSE) is expected to have far reaching effects on the local bourse, the company itself and investors as the telecommunications group moves to restructure its business in line with regional industry practices.
On the ZSE Econet’s exit is projected to result in a significant reduction in market value.
As one of the exchange’s most liquid and widely held counters its delisting is expected to wipe more than US$700 million off the bourse’s market capitalisation.
The move is also likely to further dampen investor confidence and reduce overall market liquidity given Econet’s long standing role as a key trading stock.
The delisting is also expected to create challenges for index tracking products.
With the loss of a major constituent some investment funds have already struggled to replicate their benchmark indices.
This has contributed to proposals to terminate products such as the Old Mutual ZSE Top Ten Exchange Traded Fund.
Econet’s departure adds to a broader pattern of companies either exiting the ZSE or opting to list on the US dollar denominated Victoria Falls Stock Exchange (VFEX), alongside firms such as Innscor and Axia.
For Econet Wireless Zimbabwe, the delisting forms part of a strategy aimed at unlocking shareholder value through a restructuring of its operations.
The company plans to separate its core mobile telecommunications business from its passive infrastructure assets, including towers, power systems and real estate, into a new entity, Econet InfraCo.
This approach reflects global telecommunications trends where infrastructure units are often spun off to realise value that may be discounted within fully integrated groups.
The restructuring is intended to improve valuation outcomes. Econet has historically traded at a significant discount to comparable African telecom operators, which typically command higher enterprise value to earnings multiples.
By separating infrastructure assets and listing Econet InfraCo independently, the group is targeting a valuation more closely aligned with regional peers.
The move also allows the remaining operating business to focus on core telecommunications services.
Investors are expected to face several outcomes under the delisting process. Shareholders who prefer not to hold shares in an unlisted company will be offered a voluntary exit.
Those who remain invested will have the option to receive shares in Econet InfraCo which is expected to list on the VFEX by way of introduction.
The VFEX’s US dollar trading environment is viewed as offering a more stable platform for valuation and capital raising.
At the same time the delisting removes one of the ZSE’s primary listed investment options narrowing choices for investors seeking exposure to large capitalization counters on the local exchange.
The proposed scheme of arrangement is also expected to affect related entities, including EcoCash Holdings, through the exchange of certain assets, potentially altering value dynamics within the group.
Overally Econet’s voluntary delisting is set to reshape the structure of the ZSE, redefine the company’s operating model and alter investment choices, reflecting broader shifts in Zimbabwe’s capital markets and corporate listing strategies.