Altech fends off DiData, MTN

Johannesburg, 04 Mar 2008

JSE-listed Altech has wrapped up its acquisition of controlling interests in three subsidiaries of Kenya's Sameer ICT Group. The deal sees Altech acquire a 51% shareholding in Kenya Data Networks, Swift Global (Kenya) and Infocom.

The acquisition does not influence Sameer's interests in Dimension Data Solutions and GSM operator Celtel Kenya.

The $85.2 million (about R650 million) acquisition, first announced in September last year, saw MTN and Dimension Data enter the fray following the signing of a heads of agreement.

Says Altech CEO Craig Venter: "MTN and DiData tried to enter discussions with Sameer, but the group kept to its agreement with us. I think if our deal hadn't gone through then they would have been more open to talks with MTN and DiData."

It is rumoured that DiData deployed its Africa chairman, Andile Ngcaba, to conduct the negotiations with Sameer.

Past politics

In a statement to shareholders yesterday afternoon, Altech did not refer to the political unrest that had swept the country since its 27 December elections.

Instead, the company commented that the acquisition supported its strategy of "moving up the telecoms value chain".

"[We're] moving up the chain, expanding our geographic presence in Africa and operating at technology's cutting-edge. We are now the leading broadband network operator in East and Central Africa. This acquisition provides Altech with the opportunity to participate in the high-growth converged technology wave, which fits perfectly with our already stated TMT convergence strategy," added Altech CEO Craig Venter.

<B>Altech's</B> <B>new interests</B>

Kenya Data Networks is a full-service digital communications data operator in Kenya. Its network infrastructure includes a 1 000km fibre line from Mombasa to Nairobi, an additional 450km of fibre in Nairobi, a fibre link to the Uganda border, over 450 WiFi hotspots and a satellite-based international gateway. It offers access to its network at wholesale rates to Internet service providers and large corporate customers. It has an international gateway licence for Kenya and advanced plans to expand to other African countries, including the DRC, Rwanda, Uganda, Tanzania, Burundi, Zambia and Malawi. It also intends to participate in a future African east coast undersea cable system.

Swift is an Internet service provider in Kenya and Tanzania. Using KDN's infrastructure and network capacity, it provides corporate virtual private network and wireless solutions, as well as VOIP services. Its products are aimed mainly at business users as contract customers. Swift consumes a large portion of the installed capacity of KDN, resulting in a close relationship between these two companies.

Infocom offers broadband, Internet and IT services in Uganda. It commenced business in 1995 and later became a division of Celtel (then MSI). It has comprehensive agreements with Celtel with respect to the co-location of equipment in the cellphone operator's facilities and other services provided by Celtel. Infocom is the only wireless broadband provider in Uganda. It is licensed to offer full communications services, including international traffic, as well as voice, data and video over any medium and technology. The company operates a WiMax network and satellite-based international gateway.

However, one investment analyst, who cannot be named, says the lack of mention gives the impression its management is "ducking the obvious".

"There's no doubt the risk profile of that region has increased and, from a value perspective, Altech is probably thinking it paid a little more than it should. On balance, I think it's a good deal, but it's going to take a little longer to get going than initially thought. I would predict the market is going to be a lot less excited than it was when the deal was first announced," he says.

In response, Venter told ITWeb that the company felt no need to discuss the politics of the region as its board had considered all the risks.

"We've had a team in Nairobi for the last two, three months. We waited for a statement on the political situation and we are satisfied with the coalition agreement [between president Mwai Kibaki and opposition chief Raila Odinga] signed last week. We've assessed the risks and are comfortable with the Kenyan environment," he said.

Targeting Africa

Venter added this deal is a first step in what could be several ventures with the Sameer Group.

"The acquisitions provide us with access to Sameer's regional expertise and Sameer and Altech have forged an alliance to pursue further opportunities in the region. Through this acquisition, we will avoid the so-called 'J-Curve' - which involves major investments in capital expenditure to build a new start-up network and to apply or bid for scarce network licences. In this case, we buy into an already existing network that has pervasive licences, which is generating substantial profits," he noted.

In an official statement, Naushad Merali, group chairman of Sameer Group, said: "Partnering with Altech is in line with our policy to look for strong strategic partnerships with the aim of increasing the portfolio of products and services and improving the service quality offered. We identified Altech as the perfect fit for our Pan African strategy and expansion."

Outside of these acquisitions, Altech says it is pursuing other initiatives in its "quest" to become a prominent broadband network operator on the African continent.

Altech's shares closed 1.5% lower yesterday, at R50 per share off low volumes.

MTN and Dimension Data had not responded to ITWeb's requests for comment at the time of publication.