Thursday, February 15, 2007

Battle for Africa Online

Telkom (South Africa) looks to emerge the winner in the battle for Africa Online after the African Lakes board (parent company) have accepted Telkom (SA)’s bid of £9.72 million (£25 per share) beating out Africa Telecoms Company (ATC) [which comprised Wananchi Online, Schneider Media and East Africa Capital Partners] who had offered £5.04 million (£18.50 per share)

While ATC had commited to move the company headquarters to Naiorbi, Telkom have not indicated their intentions for Kenya, as the Ethiopian and Malawian operations will be disposed of.

Meanwhile ATC will go ahead with its plans for laying out consumer broadband infrastructure to Kenya and other pan-African markets.

13 comments:

Sijui said...

Aaaaargh! I was so rooting for the consortium including Wananachi Online!!!!! It would have been the classic Cinderella story!!!!!!

Anyway, I hope the originial founders of Africa Online i.e. Ayisi and Co. are having a long, hearty, last laugh!!!!!!!!! Let's see if South Africa Telkom will fare better and learn from the Tragicomedy that was the Africa Lakes debacle.

Ssembonge said...

Last month's quest for African blue chips trading on the US equity markets led me to Telkom SA which is listed in NYSE.

I've managed to get a few proprietary reports of the company and should I get the energy I will blog on it.

I like it for its dividends but it has a huge short interest as of last month. Lots of investors are betting it down. The last week has seen its share price jump almost 10%.

Sijui, TKG is a better fit for AfOL than WO. I doubt if wananchi has the financial strength required to take AfOL to the next level. Don't let your emotions cloud your judgement.

Mashatall said...

SSEMBONGE.
I beg to differ, the ACT consortium has deep pockets, otherwise they would not have gone for AFOL if they did not have a strategy in place.With the NSE cooling down prior to elections, a lot of the liquidity that is in the economy, is still looking for new investments to go into.You have most of this local private equity funds holding tons of cash, with no viable ventures coming through.In my opinion this might be the best time for anyone looking for VC funding, if you approach the right people, then your idea is guaranteed to be funded.
I think the AFOL business model can not make enough cash for anyone who buys it, unless they intend to roll out the infrastructure for broadband themselves. Whats the use of riding on a pipeline that you do not own directly? you end up being at the mercy of whoever grants you the bandwidth. I agree with Banks that Wananchi should pursue the broadband route, makes more biz sense to me.

Phil said...

It,a tragedy that, AFOL, who i regard as a pioneer in developing and building convergent networks in Kenya and rest of Africa, will end up in south african hands, Telecom south Africa is only interested in its asset,s i.e the valuable name brand and the access it had in some African countries, i bet they will strip it of all assets for a quick profit or merge it into it,s own operations,
There is a race to develop advanced broadband among international telecoms, Verizon recently commissioned it,s fiber optic networks they now offer Voice/video/Data on one connection in the NYC area I will not be suprised if Telecom South Africa adopted that strategy in Africa, That explains there need to aquire companies that fit this particular criteria.

sijui said...

Ssembonge,
Wananchi Online on its own definitely cannot, remember it bid as part of a larger consortium. As for Telkom SA, maybe yes...maybe no......right now they enjoy almost monopoly status in South Africa and even then there is a rising clamor for fully liberalising SA's telecoms sector because Telkom SA performance leaves a lot to be desired. So how will they fare in the ISP market in countries where Africa Online's market share has fallen to paltry levels? They may have a capital advantage but that alone does not guarantee market share, competitive pricing does and again, in South Africa they're being criticized for exercising monopoly power with high tariffs.
http://www.cuasa.org.za/newsletters/2005/aprilmay/index.htm

http://www.webhosting.info/webhosts/tophosts/Country/......while not giving the full picture, this site provides good snapshots of ISP competitive advantage by country. They have their work cut out for them.

Ssembonge said...

mashatall/sijui, As a consumer, I hate companies that have a monopoly of their market. BUT as an investor, monopoly is sweet music to my ears. I'll check out the links and keep an eye on Telkom SA.

For example, Apple's anti-competitiveness is what makes the stock a good buy though I wouldn't touch their products.

Kayliz said...

wa!I wanted the guys including wananchi online to win this one!

propaganda said...

Banks, some answers: There used to be two 'corporate' head offices for the firm: African Lakes in London and Africa Online in Nairobi. When an IFC deal for $10 million fell through several years ago, the Nairobi office was cut (Goodbye Makatiani, Kamande Muiruri and others).

Right now it's a lean operation reporting to London (itself an office of like seven people whose only job was to sell off ALC assets). Looks like they'll just switch reporting to SA. AfOL Kenya's deal with UUNET may throw up a surprise, though, with regard to Telkom SA's long-term strategy for Kenya.

Ethiopia and Malawi must go because they're non-AfOL operations involving residual plantations and IBM dealerships. Some of the smaller operations (Swaziland, Cote d'Ivoire) will also probably be sold off.

Sijui: For some reason, Telkom SA's head, Papi Molotsane, is considered something of a lightweight by SA business reporters. So there could be more tragicomedy in the works...

Sijui said...

Propaganda,
Yep.....that is why the jury will be out on this one for a long time. Telkom SA will have the taste of the 'shoe on the other foot', they will have to rely on the infrastructure of the dominant telecoms provider in those respective countries, just like they force other ISPs in South Africa to rely on theirs.....so any comparative advantage they're used to having in that arena is gone. Unless they really become innovative and experiment with technology like WiMax etc or pump $$$ into rolling out their own infrastructure like Mashatall said. We'll see.
Like you said, Molotsane does not have the reputation of being an innovator nor thinking out of the box.

pesa tu said...

For an African Lakes shareholder Telkom-SA is the better fit BUT from an AFOL employee+customer, Wananchi consortium is the best choice

bankelele said...

Sijui: Someone should welcome Telkom (SA) to Kenya. I wonder if the CCK has any say in approval of the deal.

Ssembonge: Wananchi is probably the largest ISP in Kenya right now and Telkom's performance in SA (as a monopoly) has not been stellar -and the Kenyan (ISP) market is quite competitive.

Mashatall: The ATC bids would have paid a handsome premium, but Telkom had deeper pockets. Good point that there's much money sloshing around among institutions and private deals will explode

Phil: We wai to see what Telkom (SA) have in store for AFOL

Kayliz: They can always lure away AFOL customers

propaganda: Thanks for the background

pesa tu: agreed

Battousai said...

AS it is now confirmed that TSA have acquired AFOL
@Mashatall - AFOL have their own broadband and their own infrastructure
@Sijui - though TSA dont have a reputation for thinking outside the box...what they represent is a large pool of funds that AFOL could put to good use and regain their former glory esp in Kenya.
Capital injection into any ISP at this point would represent serious strategies and infrastructural advantage...hence the reason why Access Kenya wants to do an IPO
@propaganda...well said
@pesa tu & Bankelele...word on the ground is that AFOL Staff and African Lakes were not in favour of the ATC deal. As it was led by Richard Bell who had left the Afican Lakes board with personal scores to settle

propaganda said...

As predicted, tragicomedy unfolds! Papi Molotsane has quit as Telkom SA chief executive following criticism from no less a person than Thabo Mbeki. Can't wait to see if Telkom really has a plan for AfOL or if the new guy tries to walk away from Papi's deal.

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