Essar to raise stake in ETK from 80% to 100%; new local strategic investor sought

Mergers, Acquisitions and Financial Results

Essar Communications Holdings is looking to increase its stake in Essar Telecom Kenya (ETK) from 80% to 100%, according to Business Daily Africa. Essar Communications will reportedly purchase the 20% stake that was owned by local companies Capital Africa, CrossLink and Startnet, all of which are associated with Kenyan businessman Jos Konzolo.  Konzolo confirmed that a deal was in the works, but declined to reveal the details pending the conclusion of the transaction.

Industry regulator, the Communication Commission of Kenya (CCK), confirmed that it had received a letter from Essar expressing its intention to file a new ownership structure. Essar has a three-year window within which it must revert to the 70% foreign ownership threshold, and must therefore seek out a local strategic investor capable of contributing towards the funding of its expansion plans. Business Daily Africa quotes a source familiar with the deal who indicates that the local investors have failed to contribute to ongoing recapitalisation of the company, and Essar needs to find local partners which are capable of meeting their financial obligations, thus easing its own financial burden.
(Source: Ghanain Gronicle)

* Blue Label to sue over Nigerian Multi-Links

Blue Label Telecoms will take legal action to recover an unspecified amount of damages it says it has suffered after losing an exclusive contract with Telkom’s failed Nigerian operation, Multi-Links.

Africa Prepaid Services (APS) Nigeria, a company effectively owned 37.7% by the JSE-listed Blue Label Telecoms, signed a 10-year contract with Telkom’s Multi-Links in 2008 for the exclusive distribution of its products to the Nigerian market.
Telkom has been desperately trying to renegotiate the contract with APS for some time and acting group CEO Jeffrey Hedberg had warned that if the group was not successful in doing so, Multi-Links would not survive.

In a statement late on Friday afternoon, Blue Label said that Multi-Links “unlawfully” cancelled the contract it signed with APS. Telkom announced at its interim results presentation last week that it had decided to exit the wireless CDMA  business in Nigeria after years of heavy losses at Multi-Links.

Though Blue Label has accepted the termination of the agreement, it says it intends “instituting proceedings for the recovery of the damages it has suffered and will continue to suffer” from the cancellation of the contract. Blue Label also has distribution agreements with other operators in Nigeria, including Zain, Globacom, Etisalat and Starcomms.