Huge loses R3m on iTalk

By Alex Kayle, Senior portals journalist

Johannesburg, 11 Feb 2009

Huge Group's failed attempt to acquire iTalk Cellular will result in the company writing off R3 million in the 2009 financial year.

The group told its shareholders in a SENS announcement that its agreement for the acquisition of 59% of ordinary shares in iTalk, held by the Bebinchand Seevnarayan Trust, had lapsed. This was due to the suspensive conditions not being fulfilled within the required time period.

Anton Potgieter, Huge Group executive chairman, says that, while losing the deal was a disappointment, the company will seek other acquisitions this year, provided they are a fit with the group's strategy.

“iTalk would have been nice to have, but it wasn't a cut and dry deal. With the market as it currently stands, we predict there's going to be a lot of opportunities for the Huge Group. We are looking at expanding our business into the messaging and media space aligned to IT and telecoms.”

In November, MTN exercised its pre-emptive rights in a bid to purchase the remaining stake (59%) of iTalk Cellular. Huge Group contested the transaction, making an application to the Competition Tribunal for leave to intervene in the merger proceedings. The application was dismissed and, earlier this year, the Competition Tribunal approved the merger between MTN and iTalk Cellular.

Telecoms potential

According to Huge, the costs of the attempted acquisition of iTalk are estimated at approximately R3 million and will be written off in the current financial year. The deposit of R5 million, plus interest, has been refunded to the company.

Potgieter says its main asset, Huge Telecom, is “operating nicely and it's business as usual”.

“We've got a strong business and we are hoping to expand in the telecoms space. We grew 30% [last year] and it has huge potential and it's giving us an opportunity to grow 25% this year.”

Potgieter adds that the Huge Group will remain strong despite the economic recession. “On the telecoms side, we are fairly insulated from the crisis because we provide managed telecoms and the bottom line has become more important to our customers. We are aware there is slightly more risk, so we are managing it carefully, but the demand for our services carries on.”