Telecom Namibia Aborts Investments in South Africa and Angola

Mergers, Acquisitions and Financial Results

TelecomNamibia has not seen any returns from two multimillion-dollar investments that it made in South Africa and Angola. The company made the investments totalling N$544 million close to six years ago. Telecom Namibia has now decided to withdraw its interest in these companies, Angolan outfit Mundo Startel and Neotel in South Africa.

Telecom Namibia Managing Director (MD) Frans Ndoroma last week said they hope to recover the millions invested. "We will endeavour to recover what we invested in these companies." In an apparent attempt to diminish the impact of the failed investments, Ndoroma said: "The [non-monetary] spin-offs have been more than the investments."

Cumulatively, the company had pumped in N$429 million into Neotel by the end of April this year for a 12.5 per cent stake. Ndoroma blamed the global economic downturn as having "resulted in [projected] long-term returns - hence [our] decision to exit".

Mundo Startel financial results approved over the past weekend revealed losses amounting to US$290 000 (approximately N$2 million) for December 2010 before interest, tax, depreciation and amortisation. Ndoroma said the Angolan market had caught Telecom Namibia with its pants around its ankles.

"While entering Angola was a good business case with good [expected] short-term returns, that market has proven difficult politically, culturally, regulatory and logistically. Our business plan has not run according to plan - hence [our] decision to exit responsibly." Both investments were made towards the end of 2004. Ndoroma refused to admit that the investments were unfavourable.

He said: "A bad deal is relative - it's not a straight yes or no. At the time that we entered those markets, the predictions were pretty positive. It's not because it was bad deals, because the market conditions changed from short-term to long-term [returns]."

Responding to a question by The Namibian on how Telecom's mobile arm, Switch, was doing, Ndoroma admitted that "it's not doing as well as we have hoped, especially on the voice side. The data side is doing better." He did not want to say how many Switch customers other than employees they have. "That's a bit close to the bone."