MERGERS, ACQUISITIONS AND FINANCIAL RESULTS

Portugal Telecom Reports Strong African Growth During 2007

Portugal Telecom's subsidiaries in sub-Saharan Africa have announced an annual increase of 19.9% to 842.5 million euro, underpinned by a 52.3% increase in subscribers to 4.37 million.

Africa Holding, a subsidiary of Portugal Telecom created last year, contains all the operator's assets in sub-Saharan Africa: three fixed-line operators, five mobile operators (plus a management contract for Mascom in Botswana), and a number of other assets.

Africa Holding had an implied enterprise value of US$1.225 billion in August 2007 when a 22% stake in the unit was sold to Helios Investments. It is seeing strong organic growth from the GSM operations within the unit.

Portugal Telecom's assets in Africa, Asia, and Latin America stem from its legacy investments as a former colonial power, but the operator has expanded its portfolio beyond lusophone countries over the last few years.

The Portugal Telecom (PT) group reported 6.6% increase in consolidated revenues to 6.148 billion euro (US$9.245 billion) as at 31 December 2007, up from 5.765.3 billion euro the year previously. Revenues from the operator's Portuguese wireline business decreased because of increased competition in the voice market and pricing pressure on broadband services, but growth was driven primarily by PT's international operations, in particular Vivo in Brazil and Medi Telecom in Morocco. Wireline revenues decreased by 5.3% to 1.962.4 billion euro, domestic mobile (TMN) revenues increased by 2.7% to 1.502.4 billion euro, revenue from Brazilian mobile (Vivo) increased by 17% to 2.463 billion euro, and revenue from other group operations increased by 108.4% to 180.1 billion euro. Group earnings before interest, tax, depreciation, and amortisation (EBITDA) increased by 5.4% to 2.357 billion euro.

Portugal Telecom's subsidiaries in sub-Saharan Africa represent a relatively small proportion of the total, but are a rapidly growing business. As a proportion of total revenues, the four largest operators' revenue grew from 12.2% as at 31 December 2006 to 13.7% as at 31 December 2007. The group's two largest operators in sub-Saharan Africa, Unitel and MTC, reported combined revenue of more than 750 million euro and more than 4.2 million GSM subscribers by 31 December 2007. (Medi Telecom in Morocco reported annual revenues of 438.4 million euro and 6.7 million subscribers as at 31 December 2007).

Unitel, the Angolan GSM operator, reported a 61.4% increase in subscribers to 3.307 million underpinned by strong customer growth both in Luanda (the capital) and the main districts of the country. Unitel is rolling out GPRS nationwide, has started the deployment of EDGE in selected areas, and in June 2007 awarded a US$45-million contract to Ericsson to deploy W-CDMA in the capital, Luanda. Unitel competes with Movicel, which operates a CDMA network and has rolled out both CDMA 2000 1X and CDMA 2000 1X EV-DO networks.

In Namibia, MTC reported an overall growth of 31.3% to reach 800,300 subscribers by the year-end. Post-paid subscribers increased by 38.5% to some 71,200, representing 8.9% of the total customer base. This uptake of post-paid subscribers is driven by uptake of mobile data services; MTC launched GPRS, EDGE and HSDPA in December 2006. In March 2007, Namibia's second mobile operator Cell One launched services.

Cabo Verde Telecom reported a 21.6% increase in total subscribers to 221,200. Of this, it reported a 35.9% increase in mobile subscribers, which reached 148,000 by 31 December. Companhia Santomense de Telecomunicações (CST), the incumbent in Sao Tome and Principe, meanwhile reported a 45.4% increase in total subscribers to 37,800. Of this, 30,000 were mobile subscribers, a 63.4% increase over the 18,000 subscribers a year previously.

Global Insight

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