African Cellular Firms Ripe Again

By Eddyson Lugangwa Posted 01 December 2006 @ 07:24 pm EET     Print     Reprint     E-Mail     Comments

Nairobi (IBTimes.com) - African Cellularphone companies are bracing themselves for a potential new wave of acquisitions as cash-flush Middle Eastern players eye the high-growth industry and as SA's Vodacom redoubles expansion efforts.

South African, Middle Eastern and European operators have been jockeying for a slice of Africa's fast-growing telecommunications markets, where patchy fixed-line infrastructure has sparked an explosion in demand for cellphones.

But after MTN paid $5,5bn for Dubai-based Investcom this year, analysts declared the African mergers and acquisitions wave over, saying there was little left to buy and prices were too high.

This week, though, Vodacom said it wanted to buy a pan-African operator and shares in rival MTN rose 6% in three days amid speculation that it could become a takeover target, possibly for a Middle Eastern operator, sparking talks that the sector could be set for another round of corporate activity.

"There is nothing to stop us from buying something that has already been bought," Vodacom CEO Alan Knott-Craig said.

Most of Africa's best licenses have been snapped up by MTN, the continent's biggest operator, as well as by Celtel, owned by Kuwait's MTC, and by Vodacom, owned by Vodafone and Telkom.

MTN has bought a license in Nigeria, while Celtel has done the same in Kenya. Vodacom has also snapped up licenses in Tanzania and the Democratic Republic of Congo.

For operators keen to crack the continent's telecoms sector - which, with average penetration of just 15%, boasts some of the world's last untapped cellphone markets- the only option is to buy an existing pan-African player. MTN is the biggest target left.

With a market value of R140bn, it would dwarf previous African deals and require a buyer with big pockets.

But at a price of 13 times this year's forecast earnings, according to Reuters' data, it is cheaper than its closest peer, Egypt's Orascom, which trades at 15,28 times this year's forecast earnings. "MTN is an attractive asset so a takeover is not something we can discount," says one Johannesburg-based telecommunications analyst.

MTN Chief Technology Officer, Karel Pienaar said last month MTN had not recently been approached by any possible buyers. The company yesterday declined to comment on bid speculation.

MTC has reaped fat dividends from its $3,3bn acquisition of Africa's Celtel and analysts say other Middle East operators, flush with petrodollars, may want to get in on the action.

"MTC's acquisition of Celtel shows the importance of getting into Africa," said Paul Hamilton, telecoms analyst at the Global Insight research group.

Emirates Telecommunications, which is expanding aggressively and is eyeing stakes in operators in Algeria, Senegal, Mali, Ghana and Kenya, could be a potential bidder for MTN.

Across the burning sands, the Emirates Telecommunications Corporation (Etisalat) provides telecommunication services to the United Arab Emirates (UAE).

The former telecom monopoly offers traditional fixed-line services (1.2 million customers), GSM-based wireless network service (3.7 million subscribers), Internet service (400,000 users), and data communication.

Etisalat's E-Vision unit provides digital cable TV, and its e-Marine division installs and maintains submarine cable in the Persian Gulf region. Founded in 1976, Etisalat also operates call centers and provides research and education in the telecom field. The UAE government owns more than half of Etisalat shares and controls a majority of its board.

Qatar Telecommunications and Oman Mobile are on the acquisition trail in the Arab world, and cash-laden Saudi Telecom is searching for opportunities abroad.