Questions have been raised about the $130 million (R1.36 billion) price tag that Telkom paid for the remaining 25% of Nigerian wireless operator Multi-Links, considering that asset prices and the West African country's currency has depreciated.
Late yesterday, Telkom issued a statement saying it now has 100% of Multi-Links, having held 75% of the company since May 2007. At that time, it paid around $280 million for the 75% stake.
Multi-Links is one of Nigeria's first private telecommunications operators and the first to introduce code division multiple access mobile services to Nigeria. That country has seen explosive growth in its mobile sector during the past seven years, and it has more subscribers than SA and a larger population of about 144 million people.
According to Telkom's statement, Multi-Links' mobile subscriber growth, since its 75% acquisition in September 2007, has seen subscribers go from 262 431 to more than 1.7 million, as at 30 September 2008. At the same time, Multi-Links has effected network and capacity improvements that will bolster its ability to provide quality data products, especially to the corporate market.
Quite steep
Rajay Ambekar, telecommunications analyst at Cadiz African Harvest, says the premium in the price paid is puzzling as, due to the global economic meltdown, asset prices have fallen and the Nigerian currency, the Niara, has depreciated by 30% against the US dollar.
“The price seems quite steep when one considers this. There are some benefits to having 100% of a company; however, Telkom already has a controlling stake, so they are not paying a premium for control,” he says.
Thami Masingo, Telkom's chief of global operations, said yesterday when questioned about this on SAfm Market Update: “It is a market that is, as you know, uppermost in our strategy to really try and conquer - and get there and get our hands dirty. It's an exciting market, a growing market, and it was important for us that, when the previous shareholder, which is the 25% shareholder, wanted to exit the business, we get the first opportunity to do that.”
Masingo said Nigeria is a regional base for Telkom and for what it wants to do for its shareholders up there.
Expansion determination
“I think there's a huge growth opportunity. I think one can never underplay what is going on there in the ICT space and, therefore, we believe that if we get our ducks in a row we will do well in that market,” he told the radio show.
Telkom CEO Reuben September said: “Our 100% ownership of Multi-Links, therefore, not only meets Telkom's broader investment criteria, but also provides us with the opportunity to expand our mobile capability.”
September added that the transaction advances Telkom's goal of becoming Africa's leading ICT solutions provider.
He noted that the Multi-Links deal demonstrates Telkom's determination to expand domestically, as well as beyond SA's borders into areas of growth, healthy returns and value creation for the company's shareholders.
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