MWeb's price is under downward pressure as a result of the activities - or otherwise - of the Independent Communications Authority of SA (ICASA), say industry analysts.
Naspers last month put MWeb, its in-house Internet service provider, on the market, saying the company no longer fit into its broader strategy, which was to focus on online content platforms.
IDC telecommunications analyst Richard Hurst confirms the industry view that the company can be sold for between R1.4 billion and R2 billion. "The value seems to be fair based on MWeb's current position in the market via its subscriber base," which World Wide Worx MD Arthur Goldstuck puts at 350 000.
However, Goldstuck gives the company a lower valuation, saying MWeb "may well have a value of between R1 billion and R2 billion, thanks to its subscriber base of around 350 000, but that assumes that liabilities will not have to be taken over".
He notes MWeb "took many years to reach operational profitability and was in fact delisted in 2001 partly because its poor financial performance was so often in the spotlight".
"Another key consideration is the fact that Naspers [MWeb's owner] is getting out at a time when MWeb is facing the challenge of investing hundreds of millions of rands in new infrastructure, along with the regulatory battle to get approval for that infrastructure."
Goldstuck explains that MWeb has a clearly stated intention of building its own network, "so that they can move away from reselling other telcos' services and become a first-tier access provider and eventually telecoms operator in their own right".
"Their WiMax pilot was the first step in this direction, but ICASA pulled the plug on it, and are now delaying issuing new ECN licences to anyone but the incumbents."
Hurst adds that the "mentioned regulatory hurdles and uncertainty will place a question mark over the higher valuation".
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