Batanai Matsika 
FOLLOWING the unbundling of the Econet Group into two separate entities (Econet Wireless Zimbabwe and Cassava Smartech Zimbabwe Limited), there has been misapprehension amongst most analysts that Econet Wireless Zimbabwe might have lost its lustre. 
This could have been triggered by the fact that the cash-generating mobile money business (Ecocash) is now housed in Cassava Smartech Zimbabwe along all other interesting smart digital technologies like Vaya and Ownai.
Econet Wireless Zimbabwe is primarily focused on the voice and data business. Whilst it is a fact that voice revenues have been on a downward trajectory (in real terms) and margins have been under pressures due to (i) regulations and controls on tariffs and (ii) increased voice penetration levels in Zimbabwe, the same cannot be said of the data business.
One has to look at two important trends when evaluating the data business. First is the demographic profile of Zimbabwe. From a broader African context, the continent has a bottom-heavy demographic profile which implies a youthful population. Approximately 60 percent of the entire continent is aged below 25, making it the youngest continent in the world (the United Nations defines youth as people aged 15 to 24 years). By 2030, it is predicted that the number of youths in Africa will have increased by 42 percent.
Secondly, mobile Internet penetration remains low in Africa and exhibits growth potential in the future. According to GSMA Intelligence, there were 456 million unique mobile subscribers in Sub-Saharan Africa by the end of 2018 — an increase of 20 million over the previous year and representing a subscriber penetration rate of 44 percent.
Around 239 million people, equivalent to 23 percent of the population, also use the mobile Internet on a regular basis. Sub-Saharan Africa will remain the fastest growing region, with a CAGR of 4.6 percent and an additional 167 million subscribers over the period to 2025. This will take the total subscriber base to just over 600 million, representing around half the population.
Across the region, the demographic bulge will result in large numbers of young consumers becoming adults and owning a mobile phone for the first time.
This segment of the population will account for the majority of new mobile subscribers and as “digital natives”, will significantly influence mobile usage patterns in the future.
A further analysis of changes in the behaviour and norms amongst youth is also critical in evaluating the potential of the data business. Some of the key trends include (i) the rise of an Emoji generation and (ii) Internet dating amongst young adults.
The rise of an Emoji generation
In 2015, the Oxford Dictionary chose, as its “Word of the Year,” an emoji — the “Face with Tears of Joy”. This has rather profound implications for the future of writing, literacy, and human communication.
On its website, the Oxford Dictionary explained that it chose an emoji over a traditional phonetic word because it “captures the ethos, mood, and preoccupations” of the contemporary world. The emoji generation speaks to the increased role of social media platforms in terms of communications. Social platforms like Facebook, WhatsApp, Twitter, LinkedIn, and Instagram are driving the consumption of data.
Today, musicians, artists and advertisers use emojis in their tweets, on Facebook pages, on Instagram, on websites, and in other digital venues.
The role of social media in politics is also widespread. Tweets and video clips are influencing elections and providing a new avenue to organise protests. We note that additional emoji characters are being created on a daily basis and in some cases, even modification of emoji for personalised or specialised use. A youthful population guarantees that there will be sustainable demand for data bundles given the increased use of social media platforms.
Internet dating amongst young adults
Another important trend that is driving Internet usage is the increase in the popularity of dating sites and applications.
In the past, the choice of a life partner was limited by location and class. However, sites like match.com and apps like Tinder are proving particularly helpful for people needing to be active in the world of dating. Tinder, for example is used widely throughout the world and is available in over 40 languages. As of late 2014, an estimated 50 million people used the app every month with an average of 12 million matches per day. It is basically a geo-social networking and online dating application that allows users to anonymously swipe to like or dislike other profiles based on their photos, a small bio, and common interests. Once two users have “matched,” they can exchange messages. It is estimated that dating sites and apps now account for about a sixth of the first meetings that lead to marriage. Globally, at least 200 million people use digital dating services every month. Recent developments such as social-distancing measures (a result of Covid-19) are also catapulting the penetration of dating apps and adding to the consumption of data.
Overall, we opine that data providers are destined to earn untold riches as trends highlighted in this article evolve.
It could therefore be premature to think that Econet has lost its gleam. While the telecoms sector in Zimbabwe has been marred by falling mobile voice traffic, forex constraints and falling disposable incomes, Econet remains a market leader in the sector with 69.4 percent market share in active mobile subscriptions, 80.1 percent in voice traffic and 71.9 percent in data traffic.
Earnings visibility has also been overshadowed by exchange losses that are largely associated with high repatriation risk in Zimbabwe. At a current trading price of 498.33 cents, the stock is on a PBV of 3.1x suggesting that the counter cheap when compared to international peers with an average PBV of 3.9x. Our method that involves stripping out exchange losses gives a F2020F PER of 12.3x. We think investors should be adding this stock to core positions given the potential in data consumption. BUY!
● Matsika is the head of research at Morgan & Co, and founder of piggybankadvisor.com. He can be reached on +263 78 358 4745 or batanai@morganzim.com / batanai@piggybankadvisor.com
