South Africa firm earns Sh1.3bn from sale of KDN stake

Altech, a South African technology firm, has completed its exit from the Kenyan market with the sale of a stake in UK company Liquid Telecom that it acquired last year in exchange for shareholding in Kenya Data Networks (KDN).

Altech said in a regulatory filing that it would sell an 8.6 per cent stake that it owns in Liquid Telecom for $55 million (Sh4.77 billion), having acquired the shareholding in February 2013.

“Altech has exercised its put option and has entered into an agreement with, inter alia, Econet Wireless Global Limited to dispose of its 8.6 per centequity interest in Liquid for a cash consideration of $55 million,” said Altech in a statement.

“This consideration will give rise to a profit on disposal of Sh1.3 billion (134 million South African rand) before tax,” it added.

The filings with Johannesburg Securities Exchange (JSE) value Liquid Telecom’s business across Kenya, Uganda, Rwanda, Zambia, Zimbabwe, Botswana, Democratic Republic of Congo, Lesotho and South Africa at $640 million (Sh55 billion).

Altech says the telecoms business in East Africa no longer fits its restructured operations.

“Following the delisting of Altech and the creation of the Altron Telecommunications, Multi-media and Information Technology division (Altron tmt), both the Altron and Altech boards no longer consider Altech’s 8.6 per cent equity interest in Liquid to be core to the ongoing operations of the Altron Group,” said the firm in a statement.

Altech is also eyeing a reduction of its debt load.

“The cash consideration from the disposal will be used to reduce the Altron group’s net debt position following the scheme of arrangement between Altron and Altech, completed on 19th August 2013,” added the statement.

Liquid operates fibre infrastructure in the southern and central Africa and is partly owned by Econet Wireless Global, the company founded by Zimbabwean telecoms tycoon Strive Masiyiwa.

Mr Masiyiwa is familiar with the Kenya’s telecom business. In 2003, he won the licence to operate Kenya’s third mobile phone network, but sold it five years later to India’s conglomerate Essar, which later launched yu Mobile.

Altech was initially operating through KDN which it co-owned with businessman Naushad Merali. The duo reduced their shareholding after they sold a combined 80 per cent stake to UK-based Liquid Telecom, a year ago, in a deal that resulted in KDN rebranding to Liquid Telecom.

READ: KDN changes to Liquid Telecoms after sale of stake

Should the board approve the sale it will result in Econet Wireless tightening its grip on the telecoms business at it is the largest shareholder in Liquid Telecom. Altech said that once the board approves, Econet is expected to pay Altech the cash by February 28.

The Kenyan unit has lost market share and sales mainly due to increased competition and the loss of big contracts including the multi-million shilling contract with Safaricom in 2011.

Altech had previously said that KDN needed capital injection to make it comfortably compete with rivals, which was a chief reason for selling its stake.

The firm recently won a contract that will see its subsidiary, the East Africa Data Centre, host the Kenya Internet Exchange Point (KIXP).

The East Africa Data Centre was chosen to host KIXP by the Telecommunications Service Providers Association of Kenya (Tespok) after winning the tender from a pool of seven applicants.

The East Africa Data Centre will have dedicated hosting, interconnect services, co-location, disaster recovery, network-based services for banks, mobile network operators, Internet Service Providers (ISPs), cloud solutions providers and other customers.

“This is an important strategic decision for the Kenyan telecom market as we herald a new future for interconnection in Kenya and the region as a whole. We are extremely happy with our choice of the East Africa Data Centre.  It has an excellent reputation for quality, reliability and service,” said Tespok chief executive Fiona Asonga.

The East Africa Data Centre and Tespok started working together ISPs to migrate and their infrastructure to the new location on December 1, 2013 and expect to conclude migration by Tuesday.