Mergers, Acquisitions and Financial Results

Pan-African cellular network operator MSI has raised another US$117m to fund its expansion, with immediate plans to intensify its battle against SA cellular companies MTN and Vodacom.

MSI’s first move could see it go head-to-head with MTN in Kenya, where a 60% stake in the Kencell operator is up for grabs. MSI will also escalate its war with Vodacom in Tanzania and the Democratic Republic of Congo, where the two are direct rivals.

The latest cash injection was "quite an amazing achievement", given the precarious state of the telecommunications sector, said MSI’s chief strategic officer, Terry Rhodes.

Of the money, US$109m is a loan from ING Bank and Standard Bank in London. Topping it up is a sixyear unsecured loan of US$8m, the first loan ever made by the Emerging Africa Infrastructure Fund, with backers including the Development Bank of Southern Africa.

MSI last raised money in September 2001, drawing in $120m to beef up its operations in 13 African countries. The company was last seen in SA during the battle to become the third cellular operator, as part of the defeated Khuluma 084 consortium.

Despite not winning a foothold in SA, it has not lost its appetite for tackling MTN and Vodacom in other territories. "We have reached a point where all our operations are self-sufficient and we have 1,25-million customers," said Rhodes.

Its results due soon for financial 2002 should show a profit before tax and amortisation, although the bottom line is not yet profitable. "This extra money is to help us grow faster to compete with Vodacom in Tanzania and ... (Congo) to make acquisitions," said Rhodes.

He confirmed that both MSI and MTN have carried out due diligence on Kencell, where a 60% stake held by the debt-ridden European operator Vivendi is for sale. Kencell is 40% held by the local Sameer Group and is Kenya’s second largest cellphone operator, with 600,000 subscribers.

MTN has been asked to bid for the stake in partnership with a Kenyan financial house, ICDC In vestment. ICDC and MTN previously worked together as joint bidders for the second Kenyan licence before they were beaten by Vivendi.

Now the victorious Vivendi is scaling back its costly foreign activities and its stake is on the market. However, since the buyer will inherit the Sameer Group as its local partner, Rhodes said there was no need for a foreign operator to team up with local investors.

"We will bid for the 60% by ourselves and I think MTN would also want the whole 60%. It’s going to be an interesting battle," he said. "Kencell isn’t yet profitable and it has more than $250m in debt, all provided by Vivendi, and they are looking for a buyer to take that on. The two serious contenders are us and MTN." The bid for Kencell will prove a sizable commitment for any operator, including MSI with its newfound wealth.

Business Day