South Africa: Digital Delay Holds Up Altech BEE Initiative

Mergers, Acquisitions and Financial Results

Altech said last year it would sell shares to black investors in its subsidiaries, including Altech UEC, which manufactures decoders.

ALLIED Technologies (Altech) has put on hold its plan to sell shares to black investors in its decoder manufacturer business because of the government's delay in deciding on the technology standards for digital broadcasting.

Altech said last year it would sell shares to black investors in its subsidiaries, including Altech UEC, which manufactures decoders. Since its announcement late last year, it has sold shares in Altech Netstar and will be announcing the empowerment deal of its Altech Fleetcall subsidiary in the next few weeks.

"The Altech UEC's empowerment deal is aligned to the outcome of the digital technology standards. If the government hasn't announced anything, I don't need to announce the BEE (black economic empowerment) transaction right now," said Altech CEO Craig Venter.

"We are ready to announce it but since we made commitments to work with about 2000 small to medium companies we will wait for the government's decision so that we can align our objectives accordingly." He said the announcement had been delayed by six months.

Altech has threatened to sue the government if it adopts Japanese digital broadcasting standards and not European standards, which the industry has been testing for the past two years based on a Cabinet decision four years ago.

Mr Venter said although Altech UEC's infrastructure was capable of also manufacturing decoders to the Japanese standard, the industry had invested R700m. It would also delay the deadline of 2015 by another three to five years.

"This thing (the review of the technology standards) is wrong. It does not make sense. This is not an Altech issue, the whole industry is up in arms. But we will be at the forefront of a legal action," he said.

Altech is already manufacturing the European standards decoders for Australia, Kenya and Nigeria, where it recently set up a factory that is due to start operating soon.

Yesterday, Altech reported flat revenue of R4,78bn for the six months to August, from R4,73bn last year. Operating profit declined 25% to R361m from R479m. Profit after tax was R232m from R322m. The company blamed the performance on, among other things, the postponement of key contracts at its East African telecom s subsidiary.

"Despite the performance, our businesses are doing well," said Mr Venter. He expects the performance for the second six months to improve as certain factors that affected earnings are not expected to recur.

The telecom s division, which consists of Altech Autopage Cellular, Altech Technology Concepts and Altech Netstar, marginally increased revenue to R3,3bn from R3,2bn.

Protea Hirschel, an analyst at Frost & Sullivan, said many Altech customers, both retail and corporate, still feel the effects of last year's poor economic conditions, and this is reflected in Altech's results. "Falling margins on submarine bandwidth have also weighed on its profitability in East Africa as this market has become more competitive."