Mergers, Acquisitions and Financial Results

As the African mobile market is now almost completely licensed, attention is now shifting to the competition for existing mobile companies in major markets. A major pan-continental fight is shaping up between MTN and Vodacom and it is difficult to predict who will win. MTN is still talking top Kencell and the Government’s need to fundraise for Telkom Kenya include selling part of its share to the UK’s Vodafone, who are also minority shareholders in Vodacom.

According to a report in the East African Standard, the chief executive of Kencell, part-owned by France’s Vivendi Universal, has dismissed as "rumours" reports that South Africa’s MTN was about to buy a stake in the unit.Vivendi officials had said back in early 2002 that the company intended to sell shares in some of its companies, including Kencell, to cut its heavy debt.

South Africa’s MTN, Mauritius Telecom and Netherlands-based MSI are some of the companies said to be interested in the 60 per cent stake. "Nothing has been done. Any noise coming from anybody is just rumours," Kencell Communications CEO Philippe Vandebrouck told Reuters. "MTN is one of the companies. They’re still interested, but there’s nothing new as far as I know," he said.

Incumbent telco Telkom Kenya may off-load 11 per cent of shares in its mobile phone subsidiary, Safaricom, to Vodafone of the United Kingdom Such a move is being considered as a way for Telkom to raise funds for capital expenditure and pay off some of its debt. The proposal is contained in a new confidential government report that provides specific details on how the government intends approach privatisation of parastatals.

Telkom and Vodafone are joint partners in Safaricom , with Telkom being the majority shareholder with a 60 per cent stake. If the proposal by the government is implemented, Vodafone will assume 51 per cent shareholding of the company, giving it majority ownership and control of Kenya’s first and largest mobile phone service provider. Under the arrangement 49 per cent of the remaining stake will be reduced further by floatation of 25 per cent of the shares on the Nairobi Stock Exchange. The remainder will strategically be retained by Telkom to be sold later. However, for the transaction to kick off, the parties have to come up with ways of lifting charges which lenders have on Safaricom shares. Firm to waive pre-emptive rights

Both Telkom and Vodafone have charged their shareholding to Law Debenture Trust Corporation Plc to secure medium term notes for Sh4 billion and a five-year loan facility of 25 million euros. This charge extends to any new shares issued by Safaricom, hence the suggestion that Telkom sell 11 per cent of its shares in Safaricom to the British Company, to enable them to negotiate the lifting of the charge and thereby facilitate the sale of shares.

Although Vodafone presently holds pre-emptive rights, it is expected to waive the rights to facilitate the transaction. An attempt by the government to sell 49 per cent of Telkom’s shares to a strategic investor two years ago came a cropper. In that transaction, the 49 per cent shares which were to be sold was to comprised of 23 per cent of the existing shares of the government and 26 per cent of new shares. Under the arrangement, part of the proceeds from the sale were to accrue to the government with the remaining going to Telkom for for expansion. With the deal having collapsed, Telkom was denied the expected financing. With no other sources of funds, Telkom has had to rely on internally generated funds and short-term supplier credit to finance its roll-out plans. The upshot is that the state-owned company has been unable to meet roll-out licence obligations to the Communications Commission of Kenya(CCK) -causing it to be penalised by the market regulator.

(sources: East African Standard and The Nation)