Mergers, Acquisitions and Financial Results

South African telecom giant MTN has acquired a 51 percent stake in Loteny Telecom, trading as Telecel Cote d'Ivoire, in West Africa's Republic of Cote d'Ivoire, the group announced on Tuesday.

"We confirm all outstanding conditions precedent for the acquisition have been met," said Phuthuma Nhleko, chief executive officer of the MTN Group.

"This acquisition is in line with MTN Group's vision to become the leading telecoms operator in emerging markets and its geographic and strategic footprint in West Africa has now been expanded and consolidated."

The acquisition is effective from July 1 and MTN will assume control of the operation with more than 800 000 subscribers and a 46% market share. The value of the deal has not been disclosed.

"As an established operation, Telecel Cote d'Ivoire holds very positive growth prospects for the Group," said Nhleko.

Telecel Cote d'Ivoire was the first mobile operator in Cote d'Ivoire to introduce pre-paid cards in 1998.

The country has recorded one of the highest growth rates for GSM services in Africa over the last five years and growth potential still remains high, given the current mobile penetration rate of approximately 11 percent, Nhleko said.

The total mobile market at the end of 2004 was 1.8 million subscribers. The penetration level is expected to grow to 12 percent in 2005 (2.2 million subscribers), 18 percent by 2010 and 20 percent in 2015.

MTN announced last month that it was acquiring Zambian operator Telecel Zambia. The two acquisitions bring to eight the number of MTN's operations and bring the total subscriber base to more than 16 million from the 14.3 million recorded by the group at March end. The company already has operations in South Africa, Swaziland, Rwanda, Uganda, Cameroon and Nigeria.

The MTN Group has also acquired the remaining 40% interest in MTN Network Solutions from Johnnic Communications (Johncom). This gives MTN full ownership and control of MTN Network Solutions. MTN Network Solutions was created through the joint purchase by the MTN Group (60%) and Johncom (40%) of ISP Citec, in 2001.

Yvonne Muthien, group executive: corporate affairs, MTN Group says: “This move signals a new chapter for MTN Network Solutions, and underpins the MTN Group strategy in a world of converged telecommunications. MTN Network Solutions will be fully integrated into MTN SA, creating synergies between our GSM and IP networks.”

Paul Jenkins, Johncom corporate and business affairs director, adds: “We have been pleased with the success and profits generated by Network Solutions. It has become increasingly apparent that MTN could better leverage the opportunities that would contribute to Network Solutions’ continued success.”

According to Muthien, MTN Network Solutions is positioned to harness the synergies between telecoms, IT, media and entertainment, in the convergence of IP networking and GSM technologies. In 2004 MTN Network Solutions received Cisco Silver Partnership Status, and, with the construction of a new commercial hosting facility in Rosebank, it has become a specialist in hosting high volume Web sites, she concludes.

THE MTN Group has now entered into an agreement to acquire a controlling stake in Telecel Zambia, subject to regulatory and competition approval from the relevant authorities in Zambia.

And MTN has dropped a legal battle over a bid to acquire Celtel International.

MTN's Group chief executive officer Phuthuma Nhleko said in a statement yesterday that Telecel Zambia, which has a market share of about 21 per cent, has met all the conditions of MTN's investment criteria.

Telecel has at least 150,000 subscribers and has a presence in seven of Zambia's nine provinces.

Nhleko said the company has also entered into an agreement to acquire a 51 per cent stake in Telecel Cote d'Ivoire, which has in excess of 800,000 subscribers and an estimated market share of 46 per cent.

Nhleko said the agreements for acquiring the two companies were in line with MTN's vision to be the leader in telecommunications in developing markets and its commitment to growing shareholder value.

He said the Cote d'Ivoire transaction was subject to minor conditions and that regulatory approval has already been obtained.

"We are very pleased with these transactions, which are in line with MTN's expansion strategy of consolidating our position on the continent," he said.

Nhleko said the successful conclusion of both agreements would increase the MTN Group's operations to eight, including MTN Rwanda and MTN Uganda and grow the total subscriber base to over 16 million.

MTN already has operations in Nigeria, Cameroon, South Africa and Swaziland respectively.

The Zambian mobile market is currently estimated at slightly over 500,000 subscribers with a penetration rate of approximately 3 per cent based on a population of nearly 11 million.

Launched in 1994, MTN has established a reputation for massive investments for ensuring wider network coverage and to date the group has invested 23.4 billion South African Rands (approximately K16.3 trillion) in infrastructure across its GSM networks.

The group recently announced its annual results, showing continued strong growth during the 2005 financial year.

According to MTN's recently announced annual results, the company that is South Africa's only listed mobile telecommunications operators has reported 45 per cent rise in its adjusted headline earnings for the year ended March 2005. The company's subscriber base grew 50 per cent to 14.3 million in six countries where it operates, though it still lags behind Telkom's (TKG) Vodacom Group, which has 15.5 million users in five markets.

And MTN last week dropped a legal battle to seize control of rival operator Celtel.

The bid for Celtel was hatched as a strategy for massive, instant expansion, as Celtel operates in 13 African countries. However, Celtel shareholders accepted a far higher bid of US$3.3 billion offer from Kuwait's Mobile Telecommunications Company. MTN's bid for Celtel was US$2.67 billion.

Nhleko said MTN had decided not to pursue the legal action it had instigated to prove a breach of contract.

Commenting on MTN's pending acquisition of Telecel Zambia, Celtel commercial director Norman Moyo yesterday said the planned acquisition was a welcome development.

Moyo said Celtel Zambia was not worried about the increased competition that would result from MTN's entrance into the Zambian market.

"The mobile telecommunications sector is not a cutthroat industry. New competition will excite the market especially that market penetration is still below 4 per cent," he said.

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