ALTECH, ECONET WIRELESS FORM USD140 MILLION JOINT VENTURE
Telecommunications, multi-media and information technology group company Altech and the Econet Wireless Group, an international company with global telecommunications interests in Africa, the United Kingdom and the Asia Pacific region, are to join forces to establish a new South African-based telecommunications company initially valued at approximately one billion rand (US$140 million).
The companies announced the venture, which is subject to regulatory and other approvals, on Wednesday last week. The newly formed 50-50 joint venture between Altech and TSMI, (TSMI being the international investment company of the Masiyiwa family and the founders of the operations comprising the Econet Wireless Group), will ultimately take ownership and jointly control all current Econet Group assets, including operations in New Zealand, the United Kingdom, Lesotho, Botswana, Kenya, Zimbabwe and Nigeria.
The new company, (Newco), will have a Board chaired by Altech and a management team led by Econet Wireless, together with Altech. Altech CEO Craig Venter said the Econet group had been identified as a compatible partner about two years ago and that he was delighted that agreement had finally been reached in a deal which would thrust the Altech group into being a true global player.
“I have stated in the past that in order for Altech to continue to grow significantly, it would have to globalise,” said Venter. “This venture is a perfect fit within our TMT and globalisation strategy as Econet is an ideal entry point for Altech into mobile network operations with its base of high- growth operations in Africa, and several exciting initiatives in other parts of the globe.”
Venter said Altech’s marketing and systems expertise, developed within Autopage and the group’s other subsidiaries, would be of direct benefit to Econet, together with Altech’s support, financial and administrative structures.
He said that the transaction would create significant opportunities and synergies for Altech and its various subsidiaries, including in the supply of products and solutions to the various operations comprising Econet.
Venter said that while the venture would significantly elevate Altech on the value chain, it would also strategically position the group away from the supply of equipment towards the development of solutions and services, thereby protecting and increasing margins.
“It also extends Altech’s exposure within the mobile telecommunications industry,” he said.
Econet Wireless Group CEO Strive Masiyiwa said the venture would pave the way for the group’s further expansion into the lucrative African market and internationally.
“The investment by Altech will strengthen Econet’s capital base and will enable us to develop existing operations and to raise our shareholdings in certain existing operations to a controlling stake,” he said.
Masiyiwa said the venture also positioned the Group well to attract additional funding for future expansion at a time when there had been a dramatic turnaround in the global telecom sector.
“In partnership with Altech we will have the means to match our determination to be a long-term influential player in the African, indeed global, cellular market.”
Both Altech and the Econet Wireless Group have agreed that Econet will continue to assess various opportunities in Africa and elsewhere.
Additional funding for these opportunities, plus for Econet to enhance its ownership position in certain of its network operations, will be on a basis to be negotiated between Altech and TSMI.
Masiyiwa confirmed that initially Newco would not include the Zimbabwe Stock Exchange-listed Econet Wireless Holdings or its subsidiaries and international interests.
“Those interests will be incorporated into the joint venture company when political, regulatory and economic conditions permit. This includes the ability to repatriate funds.”
Masiyiwa also confirmed that the joint venture did not affect the structure of Econet Wireless Limited which currently holds five percent interest in Econet Wireless Nigeria.
Subject to conditions, Altech will subscribe for shares in Newco representing 50% of the entire issued share capital of Newco, for a cash consideration of US$70 million.
TSMI will subscribe for the balance of the issued share capital of Newco, with the consideration being settled by the injection of selected assets of Econet, valued at US$70 million.
The assets affected by the transaction include Mascom Wireless Botswana, a mobile network operator in which Econet currently owns 20% and is negotiating for additional shares.
Mascom was launched in March 1998 and has grown its subscriber base to approximately 310,000. Its market share is approximately 70 percent.
Also affected is Econet Wireless Kenya, in which Econet has an agreed option of 51%, will be the third GSM mobile network operator in Kenya.
Econet is in the process of finalising the terms and conditions of its operating licence with the regulator, and its shareholding structure with its operating partners, before commencing the installation of the network.
Also affected by the deal are Mountain Kingdom Communications (MKC), Lesotho, in which Econet holds 21% of the issued share capital. MKC owns 70% of Lesotho Telecom, a joint venture with the Lesotho government.
Lesotho Telecom owns and operates the national fixed line network, transmission infrastructure and international gateway as well as the second GSM operator of Lesotho.
Econet Wireless Limited (EWL) holds five percent of the share capital of Econet Wireless Nigeria. EWL and Econet Nigeria reached agreement of the subscription of additional shares in Econet Nigeria for US$150 million, to increase EWL’s shareholding to 33%.
The implementation of this concluded agreement was interrupted when a third party network operator made an alternative investment proposal to Econet Nigeria.
This matter is now the subject of an international arbitration process, the outcome of which is expected soon.
Econet Nigeria was launched in August 2001 and currently has more than 900 000 subscribers, approximately 30 percent of the mobile market in that country.
Econet Wireless New Zealand, a joint venture between Econet and a Pan-Maori investment syndicate, the Hautaki Trust, have acquired the rights to the second GSM spectrum licence, inclusive of rights to provide 3G services, in New Zealand.
Econet holds 65% of the issued share capital in Econet New Zealand and has identified that market as having high growth potential.
Econet Wireless International is wholly owned within Econet and employs the technical and management resources for the network operations of Econet.
The company employs over one hundred professional staff in the various disciplines required to design, construct, market and manage mobile telecommunication networks.
Econet Satellite Services is wholly owned within Econet and is based in the United Kingdom where its main earth station and United Kingdom/European network links are located.
Its satellite footprint covers Africa and Europe and is used as an international telecommunications gateway between these continents. Econet Satellite, through a majority stake in a newly established subsidiary, also operates prepaid telecommunication services from the United Kingdom and Europe into Africa.
In wrapping up the benefits of the venture for Altech, Venter said the deal would re-position Altech as a listed entity and further allow the group to become “master of its destiny” by becoming even less dependent on overseas principals while increasing development of its own proprietary technologies.
At the same time it significantly enhances Altech’s Black empowerment initiatives.
“Also, after the disposal by Altech of Alcatel Altech Telecoms, the telecommunications leg of our TMT portfolio was weakened. This venture rebalances that structure,” said Venter.
“Finally, the venture is a roadmap for further growth for Altech for the future and will allow the group, through EWG, to cherry-pick lucrative markets normally not that attractive to larger operators.”