Vox Sitting Pretty After Acquisitions in South Africa

Mergers, Acquisitions and Financial Results

The pace of mergers and acquisitions in the hi-tech sector will slacken off as interest rates climb and the cost of capital swells, Vox Telecom believes. The latest deal by Vox to acquire Storm Telecom for R360m has won approval from the Reserve Bank and the competition authorities, and should be its last takeover for a while, said chairman Tony van Marken.

Vox has absorbed a dozen voice and data players so far, including Orion Telecom, Amvia and Absa's internet division. The number of worthwhile opportunities was now drying up, Van Marken said, with Storm being the last major independent telecoms player worth buying.

"Looking at where the financial markets are right now, I am relieved that we got our timing right. We bought 12 companies in 18 months, raising R1.1bn in cash. We think we paid a reasonable price and haven't overpaid."

Global stock markets had shed trillions of dollars, and although plunging share prices should make acquisitions more affordable, there were few assets to buy in SA, Van Marken said. Vox had assessed other potential takeovers but shareholders were asking too much, he said.

"Raising equity will be more difficult and we have high interest rates so debt isn't cheap. It's going to be a much tougher fund raising environment and far more challenging to do acquisitions."

Vox itself got regular predatory overtures, Van Marken said. This would continue as demand for voice and data services grew.

"There will be international players looking at SA and growth potential here -- and players here are looking at the same thing -- so we are an acquisition target."

Vox financed the Storm acquisition by issuing R400m in new shares to black investors. This gave it a more hefty black stakeholding, 41,8%, than any other telecoms firm in SA. Main black investors are the Lereko Metier Capital Growth Fund, with 23,6%, and Mvelaphanda, with 12,42%.

That black profile should help Vox win more contracts in the government and parastatal sectors, Van Marken said. And deals made in the past few months positioned it well for growth.

Business Day