Altech Buys 51 Per Cent Stake in Sameer ICT Ltd

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This week saw South Africa’s Altech buy a 51% stake in three subsidiaries of the Sameer ICT Group for $85.2 million. Part of the deal is that on top of the purchase, both shareholders will commit another US$30 million to back KDN’s regional expansion plans. Russell Southwood spoke to Altech’s CEO Craig Venter about the deal and looks in detail at its Uganda operation Infocom.

Altech will pay a total cash consideration of US $75 million for its 51% interest in KDN; Swift and Infocom. Of the total US $75 million, US $10 million will be held in escrow, pending achievement of an agreed combined profit after taxation of KDN, Swift and Infocom, for the twelve months ending 31 December 2008. In addition, Altech will put up US$10 million in working capital and the Sameer Group US$20 million. Altech says that the companies are making “substantial profits” and that the attraction of the deal is that there is already considerable sunk capital.

Its expansion plans include continuing to roll out its fibre network in Kenya and extend it into Tanzania and Uganda over the next 12 months. It will continue with the existing KDN strategy of acting as a “carrier’s carrier” whilst seeking to build on and expand its two ISP operations Swift Global in Kenya and Infocom in Uganda. Both are said to be the largest players in the market but as ever with these kinds of claims, it depends which cake you’re slicing.

According to Venter, at present, a large part of KDN’s traffic comes from Swift Global and it wants to expand further. This will involve rolling out more points of presence across Kenya.

In terms of international fibre, KDN is known to be on the list of shareholders for TEAMS. It has been allocated a 10% shareholding costing US$11.1 million for 65.8 mbps. But according to Venter no formal commitments have yet been entered into.

Venter sees the deal as part of a bigger strategy for Altech to capitalise on its three core areas of telecoms, IT and multimedia. It clearly has ambitious plans in its home country South Africa as it has been testing the mobile version of Wi-MAX across a wide range of sites. It also has Wi-Fi and Wi-MAX licences and an international gateway licence in Rwanda and is currently deploying a network in Kigali.

Taken together, the ambition is to become a Pan-African data operator. Venter told us:”The deal with the Sameer Group will give us the number one position in East and Central Africa.” He estimates that the profits from the three companies will be around $11.7 million and that this will be about 10% of the group’s overall profits. Venter is looking to invest in Africa’s “fast-track” economies when they are at an early stage of growth.

Altech’s new Ugandan operation Infocom has the largest number of subscribers in the Ugandan market. Its CEO Hans Haerdtle estimates that there are 10-12,000 Internet accounts and that his company has around 32% of them. The other big players are utl (with around 27% of the market), MTN (with its Wi-MAX offering), Afsat and Datanet.

Its Metronet offering is based on Wi-MAX in its D version with potential to go somewhere towards 8 mbps: it has 14 sites outside Kampala. It will soon start rolling out the E version of Wi-MAX, giving mobile capability. It currently has 3,500 subscribers who pay between US$280 and US$850, depending on download capacity and contention rates. It has a voice offering using VoIP called Talkline which has 5,000 subscribers after being introduced at the end of last year.

But Haerdtle, like other players in the market, is waiting for the arrival of cheap international fibre prices. He’s currently paying between US$4-6,000 duplex for satellite capacity and observes that “everything will change with the fibre link.” In preparation for that day, the company has already bought dark fibre capacity to the Ugandan border with Kenya from Uganda Electricity where it will connect with the KDN fibre link. According to Haerdtle:”In about a month and a half’s time, we’ll have a fibre link all the way from Kampala to Mombasa.”