Africa Online, Afsat Set for Merger and rebranding
Three months from today, Internet Service Providers, Africa Online and Afsat Communications are to operate as a single entity in most African markets including Uganda. The Monitor’s Walter Wafula spoke to Ken Mwai, the general manager of Afsat in Uganda to find out why.
Q: What is pushing the Afsat and Africa Online merger in Africa?
Africa Online was acquired sometime in 2007- 8 by Telkom South Group. That is a telecom provider operating outside South Africa. Similarly, Afsat Communications whose parent company was Mweb Africa was acquired by the Telkom Group in 2009.
With those two acquisitions, the Telkom board decided that it would be advantageous to it, to merge the operations of the two companies in the various countries we operate in. That is really the main core of the integration process.
Q: What are the advantages that the board is looking at?
They are looking at economies of scale, being able to rationalise the operations of the two businesses in the respective areas of operations in order to reduce the costs of operation. For instance, they have two separate entities operating in Uganda, Kenya, Tanzania, Zimbabwe, and Namibia. In Ghana they have an Afsat distributor and Africa Online.
We are offering similar services on different platforms. Afsat offers data and internet connectivity on VSAT (Very Small Aperture Terminal) services while Africa Online has a more terrestrial outlook through Wimax (Wireless). Naturally, a combination of these will give us a bigger platform of technology on which we can offer our services to the market.
Q: So, Telkom now has similar services under common licenses, doesn't it call for a change?
Currently, both Africa Online and Afsat have the Public Infrastructure Provider (networks) and Public Service Provider (for both voice and data) licenses and a couple of other authorisations. What will happen, according to the communication law of the land, is we will do away with one set of two common ones. This is because one Group cannot have two sets of common licenses in most markets we operate in.
Q: Have you made up your minds about which set to give up?
Not yet. Those are some of the issues that the board is looking at. There are quite a number of options that are being discussed at the Telkom board level.
Q: When does Telkom hope to complete the merger?
The process was meant to be complete by the end of last month. It has taken a little longer than we thought it would. But I believe within the next three months, we should have completed the technical and legal issues and received formal approval.
Q: Mergers often give birth to new brands. Do you foresee a new or uniform brand?
Yes we shall rebrand but at that point in time, I cannot disclose it. We have made notifications to the regulator (Uganda Communications Commission) regarding the changes and we are still in the legal process. We have tentatively told them that this is what we intend to do. Our shareholders are still discussing quite a number of technical and legal issues. Once the discussions are complete, we will officially communicate the Uganda position on the way forward with regard to rebranding.
Q: What is the current market share of the two separate entities and where do you think the merger will place you?
I don't have exact figures, maybe the regulator could help. But the combined entity has between 700 and 800 clients both retail and corporate. If we were taken as a combined entity, we would be between the 10% and 15%. I believe the merger will give us a fairly strong footing in the market.
Q: How is the price war in the data and internet market by the large telecoms affecting your market share?
Obviously it is affecting us. VSAT has always been considered to be a fairly expensive service. We tried to mitigate that by being responsive to our clients needs and diversifying our source of capacity. We are currently connected to two submarine fibre optic cables; Seacom and TEAMs. These have significantly brought the price of bandwidth down but only for high capacity bandwidth. We also plan to buy into the EASSy through our parent company which has a stake in it.
Q: If you are already connected to two cables, what difference will EASSy make?
You have probably heard that internet reliability from the fibres has been dodgy since they came in. So, you have to build in some back-up to improve the reliability of service. And based on what I have heard about the pricing for their services, we expect further price reductions in bandwidth costs. And this will translate into passing on that price benefit to our customers.