What Assets are EcoCash and Econet Negotiating Over?
Recently, EcoCash Holdings announced it is in negotiations to transfer certain assets to Econet Wireless.
This is big news but with very little detail available.
What assets are they talking about?
Let’s unpack!
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The start of this was cautionary announcements from both “Econets” on 16 January 2024 stating that they were in negotiations for the transfer of "some non-banking assets" in exchange for shares.
The announcement doesn't have much detail but it does give some some clues on careful reading.
But to pick up the clues, we need to understand what cautionary statements are.
Most stock markets have rules around the need for companies to issue cautionary statements.
These are needed when there is information that could make the stock price change significantly. These announcements are important as they help make markets more stable (in theory at least) which is important.
Another thing to note is that these are statements issued by the board of directors, essentially the highest level of the company.
All this is important as it means this document is, reviewed by many people, multiple times and so every sentence and every word is important.
Now let's unpack the statements.
Firstly they mention that the negotiations may result in the transfer of "some non-banking assets."
This eliminates Steward Bank, but that still leaves other businesses and most importantly the EcoCash Mobile Money service. (EcoCash MM)
Some have been speculating that the Mobile Money business is part of the deal and for some reason even calling this a merger.
This is not a merger and I struggle to see how the statements would lead one to conclude that the Mobile Money business is part of this deal.
Their first flag is the usage of the word “some”.
The statement talks bout “negotiations that may result in the transfer of SOME non-banking assets”.
SOME is a filler word. It didn't need to be there. The fact that it is there is a clue.
If EcoCash Mobile Money was being transferred it would be hard to describe the deal as "some" assets.
EcoCash MM makes up 43% of the revenue of EcoCash holdings. This is also why the company is called EcoCash Holdings. That is the core of the business.
But let's say I am being too finicky about English and the word some doesn't mean anything.
Okay, then the other data point would be the statement that EcoCash will remain listed.
How would this work if the EcoCash MM is also transferred from EcoCash?
Now technically it is possible.
They could transfer out the EcoCash Mobile Money to Econet Wireless and then leave Steward Bank as the biggest business and then rename the listed entity to Steward Bank.
On paper, this would not have been a delisting but from a perception perspective, it would make the announcement look a little misleading as effectively they would have delisted EcoCash in reality.
So if my guess is correct and not EcoCash MM is not being transferred then what are the non-banking assets that are being transferred?
I think there is a case to be made for everything else which would include Vaya Technologies and the Insurtech assets.
For me, this makes sense, especially with Vaya Technologies.
I personally always felt it didn't fit well in the EcoCash structure.
I wrote about this in more detail last year in May and yes I did use a Harry Maguire analogy to explain the point 🫣.
Below is the post.
There is a global trend of Mobile Network Operators generating more revenue through value-additional services.
It could make sense to bring more of these assets under Econet Wireless to be closer together.
However, if I have misjudged everything and indeed the Ecoash Mobile Money is being transferred then it would suggest Econet is no longer keen to be in the banking space and is potentially looking for a path to exit Steward Bank or spin it off to be more independent.
This also wouldn't be a crazy move. Mobile Network Providers are becoming more and more like Fintechs.
Consider MTN whose Mobile Money services drew a $5.2 billion investment from Mastercard.
So why own a bank (the disrupted), when you can build a FinTech (the disruptor)?
Time will tell what Econet's plans are.
They have a lot of smart people working for them so I am eager to see how this deal unfolds.
Either way, I think it could have big market implications.
I am working off of public information so as always, I could be wrong or missing something.
What do you think is going on? Would love to get your views. Please leave a comment.
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